Marital property division in a Wisconsin divorce includes not only the division of assets but also division of marital debt. It is important to understand that regardless of who is ordered to pay marital debt, your contract with the creditor does not change. If your name is on a credit card or loan, you remain responsible for the debt in the eyes of the creditor even if your spouse is ordered to make the payments in the divorce decree.
If, for example, your ex-spouse is ordered by the final divorce decree to make payments on an outstanding car loan in both your names and at some point fails to do so, the creditor will look to you to bring the account current. Or, if your ex is ordered to continue making mortgage payments on the house and falls behind, you are still on the hook regardless of the decree if you remain on the loan.
Dividing Debt in Community Property States
Keep in mind that in community property states, including Wisconsin, where spouses can be held responsible for debt incurred by their spouse during the marriage even if they were unaware of the debt or didn’t sign an agreement with a creditor, it is important to seek a full financial disclosure during divorce settlement negotiations so you get a fair shake.
Handling Marital Debt in a Divorce
Because it can get messy relying on an ex-spouse to make payments on marital debt months or even years after the divorce, it is always a good idea to pay off as much debt as possible before filing for a divorce. That said, it is sometimes difficult to achieve so, for any remaining debt, the best approach is to have your spouse refinance loans in their name alone, removing your obligation entirely. For example, if you and your spouse own a home and he or she wishes to keep it, your divorce decree should state the property will be refinanced in their name within a certain time frame or the property will be sold and the proceeds divided.
When it comes to marital debt such as credit cards that you and your spouse decide to split 50/50, there is no guarantee your spouse will live up to their end of the bargain, which could negatively impact your credit if you do not pick up the slack. Protect yourself by having an indemnity clause added to your divorce settlement agreement which will allow you to take your ex back to court for any money you have to pay to keep your credit in good standing.
Fortunately, making sure that you get a fair shake when it comes to dividing marital debt is within your control. First and foremost, when preparing for divorce, be aware of all creditor balances in your name, your spouse’s name and both of your names – reviewing credit reports for both you and your spouse is a good place to start. Tie up loose ends by paying off as much debt as possible before filing for a divorce. Any debt that cannot be paid off should be refinanced in your spouse’s name alone. For any outstanding debt you are both responsible for, including an indemnity clause in your divorce settlement agreement will protect you financially.
Contact Our Experienced Wisconsin Marital Property Division Lawyers
Have questions regarding dividing marital debt in a divorce? Contact our experienced Wisconsin family law attorneys at Probts Law Offices for help at 414-210-3135.