Most people are preoccupied with figuring out how to divide their assets and accounts during divorce and they may forget about another large component of the process: debt. While your 401k, savings accounts and property are divided in the divorce process, your debt is also a factor in the division. Oftentimes it can become a point of contention during this process. Do you know what is supposed to happen to your debt during divorce?
How Is Debt Handled?
The first step in understanding how your debt is handled is learning about separate vs marital or community property. All your assets and property, including your debt can be classified as one or the other. Separate property refers to property and assets acquired prior to your marriage while community property is all assets you acquired, during your marriage regardless of who paid for them.
For example, your student loans that you took out before you got married would be separate property while the mortgage you took out to buy your house after the wedding would be community property. Community property is subject to division during divorce, whereas all separate property goes back to the original owner.
Community Property In Wisconsin
Next, you’ll need to understand community property laws. These are the state rules that determine how community property is divided during divorce. The state of Wisconsin is a bit different because it follows community property laws rather than equitable division. That means that all community property and debts and divided equally, or approximately 50/50.
What Happens To Debt?
Due to these laws, all debt deemed community property (such as credit card debt, mortgages or other outstanding bills) is divided 50/50 during your divorce. Both you and your spouse are then responsible for your half of the debt after your divorce.
Dividing property, including debt, is usually one of the more complex parts of divorce. Consulting with a professional, such as a divorce attorney, can help you sort everything out and ensure you get a fair deal.