Debt is still a major issue in Georgia divorces. When we talk about dividing debts and assets in a divorce action, the first issue is to determine if the debt or asset is “marital.” Marital debts and assets are acquired during the marriage by either party regardless of whose name the account is in. If an asset or debt was acquired by one party prior to the marriage, it is likely pre-marital and not subject to division in the divorce.
The challenges of dividing debt in a divorce
While the court has broad discretion to award marital assets and debts to one party or the other, regardless of whose name it is in, the court cannot change or modify a contract you have with an outside person or organization.
For example, the court can order the husband to make the payments on a credit card in the wife’s name but the court cannot stop the credit card company from damaging the wife’s credit or otherwise trying to collect the debt against the wife if the husband fails to follow the court’s order and pay the debt in a timely fashion.
Debt and the marital home
The most problematic situation involving marital debt can be the home. If the debt is in both parties’ names, there are only three options for getting someone’s name off a mortgage obligation:
- Pay off the mortgage;
- Sell the house and pay the deficiency; or
- Refinance the loan into only one spouse’s name.
Paying off the mortgage is not usually an option for divorcing families and paying a large shortfall from the sale of an underwater house is often not possible either. There are some viable refinance options for upside down homes but one of the parties must have the income and credit rating to qualify for the refinance individually.
If none of these alternatives are possible, houses can be allowed to foreclose, which will obviously damage the credit of both the husband and wife. The parties can also continue to live in the home together after they are divorced. Or, one party might be forced to leave the home but still be obligated on the mortgage debt, even if the spouse that is living in the home has been ordered to pay the mortgage.
The key to fairly dividing marital debt
The solution to dividing debt almost always involves cooperation between the parties, creative thinking between the spouses and their lawyers and a well thought out settlement agreement. An experienced divorce attorney can draft a settlement agreement to help protect the financial wellbeing of their clients.