How to Separate Property and Debt in a Divorce

In a divorce, property and debt are often one of the major issues. Because of the exorbitant cost of divorce, many couples are struggling to make ends meet, with little money to go around. To illustrate the importance of property in a divorce, consider two married people who have agreed to divorce. Each has equally shared financial responsibilities.

The fair before the law rule usually requires each spouse to equally share in the marital property and debt before dividing the assets and debts. As part of the divorce decree, the court evenly distributes the couple’s debts and assets, determining who is liable for paying certain bills. Equality is usually the goal, although the distribution of assets may vary that much. If one spouse is awarded more marital property, such as a home, that spouse may become financially burdened with extra debt duties for the sake of the children.

The spouse who receives the greater amount of wealth may be tempted to use that increased wealth to support the lifestyle they’ve created for themselves, rather than spending it to properly care for their children. To avoid this, the court will likely recommend dividing debt and/or assets equally, or divide them based on a “marital property only” standard. This simply means that the spouse with the greater asset award is the one who will receive the lion’s share of the debt and assets. If one of them happens to have a huge bank account and a huge home, that person will probably receive the lion’s share of any debts or assets accumulated. The court will take into consideration the length of the marriage and the “length of time the parties” had to make the decision to separate, among other things, when setting the terms of the division of marital property and debts.

If the settlement includes a provision for child support, then that provision must be written clearly in a contract between the divorcing spouses. This requirement makes New York’s mandatory child support laws very strict. Failure to comply can result in the dissolution of the marriage. In some cases, even if the offending spouse has been ordered to pay spousal support, the offending spouse may still be able to challenge the legality of the settlement in court.

One way to divide assets and debt during a divorce is to put the bulk of the assets into a trust, usually consisting of half of the combined value of the marriages’ debts. Half of the debt could then be given to the supporting spouse, while the other half could be left in the hands of the judge or jury. This is referred to as a division of the marital estate. If both spouses agree to this arrangement, it is often included as part of the final decree of divorce.

Another option to divide the debts is to have one spouse start paying off the debts before the other spouse takes half of the assets in a divorce judgment. This requires an expensive retainer to a debt settlement company. The spouse who pays off the debts first is usually awarded the larger lump sum in a divorce settlement. This allows the spouse with the largest lump sum to buy a home or other asset, while the other spouse has to scramble to find a place to live.

A third method to divide marital assets in NY is to create separate accounts in banks. Spouses may share joint checking and savings accounts, and those accounts may be combined into one account after divorce. This separation creates an opportunity for couples who no longer have joint bank accounts to split their marital assets equally after a divorce in NY. However, separate debt accounts require that each spouse maintain separate financial records. Those records are important in a case such as this, where a creditor might attempt to seize assets from one spouse based on information contained in a debtor’s records.

Whatever method of property division couples choose, it is important that they carefully consider their decision before a judge. A divorce is a costly event, and couples who take their time to settle their true worth and establish an estate plan will be far better off in the long run. In the mean time, couples can make reasonable agreements that meet their needs. They can also hire a lawyer or two to help them with the legal aspects of a divorce. By sticking to the provisions of the final decree, couples can avoid the negative impact a divorce can have on their credit. It is also possible to have a judge lower a child support payment to encourage a mutually agreeable agreement for the future of the children.