Just like with property, debt must be characterized as either separate or community debt. Any debt incurred by one of the spouses before the marriage is separate, and that spouse will be responsible for paying that debt. Any debt entered into by either spouse during the marriage is presumed to be community debt. A party can overcome the presumption by establishing that the creditor considered only the separate estate of one spouse for satisfaction of the debt.
Once debt is characterized, the division of debt will be a factor in a “just and right division” of the community estate. The court can consider several factors when determining which spouse to award a debt: (1) the spouse’s ability to pay; (2) which party was awarded the property securing the debt; (3) the spouse’s relationship to the creditor; and (4) which party was responsible for the debt. Based on these factors, one party may end up taking on significantly more debt than the other. This is especially true if one spouse keeps the marital residence and then takes on the mortgage.
Most divorces settle, and any settlement would include division of debts. When the case does not settle, the court can deal with debts in a few different ways. One, the court can order the parties to sell certain assets to pay off the liabilities. This often occurs when neither side can afford the mortgage on the marital residence on his or her own. Two, the court can order one side to pay for a particular debt. Finally, the court can order that the parties are jointly liable for a debt. This is usually the least desirable outcome, as one spouse’s credit can be negatively impacted by the other spouse’s failure to pay.