When a couple decides to get divorced a court’s goal is to fairly distribute assets and liabilities between the two individuals. If you are filing for divorce it is crucial that you understand how shared debts are handled in Michigan and the implications of a court’s decision on your financial situation. For more information and to obtain skilled representation in your case, reach out to an experienced Oakland County property distribution lawyer today.
Is Michigan an Equitable Distribution State?
Michigan is an equitable distribution state when it comes to divorce. This means that courts do not necessarily split property 50/50, but instead divide assets in a way that is fair and equitable to both parties.
Determining what is equitable is based on a variety of factors. A court will consider aspects of the situation like the length of the marriage, each spouse’s income, each spouse’s earning capacity, contributions made to the marriage, etc.
The goal of this process is to distribute assets and funds in a way that reflects the needs, economic situation, and contributions of both spouses. A divorce should not be financially devastating to either party. Equitable distribution ensures that both spouses walk away on even footing.
What Are Shared Debts?
Shared debts refer to any financial obligations that two or more parties are responsible for. In a marriage, most debts, especially those incurred after the wedding, are considered joint. Shared debts are any financial contract that has the names of both spouses listed, meaning that they are both legally responsible for paying back the debt.
Examples of shared debts relevant to divorce can include mortgages, car loans, credit card debt, medical bills, and other joint liabilities.
How Are Shared Debts Handled During an MI Divorce?
Shared debts are considered marital property in many states, including Michigan. This means that during a divorce any joint liabilities will be divided between the spouses by the courts. Marital debts are handled the same way as marital assets, as in they are split equitably based on the financial and personal situations of each spouse.
Both parties will be required to provide the court with full disclosure of their debts and liabilities as well as their income, bank account statements, etc. The court will then determine the most equitable way to divvy up the debts. For example, a spouse who makes 5x the more income annually than the other spouse may be awarded a larger portion of the debt because they are more financially capable of paying for it. One individual may also be assigned more debt in exchange for being awarded more assets. The specifics of how it is handled will vary depending on the circumstances of the relationship.
It is important to keep in mind that regardless of the outcome of liability distribution, both spouses can still be held responsible for payments. Any individual whose name is on a debt can be held accountable by creditors, so if one spouse is awarded a debt but fails to make payments, the other spouse may face the responsibility. For more information and skilled legal advice, reach out to an experienced attorney today.