When a couple gets divorced, the separation of their financial interests involves dividing both assets and debts. Although figuring out “who gets what” in a divorce proceeding can seem like a significant issue, dividing debts can become just as contentious. Minnesota follows the equitable distribution method for dividing assets and debts, which can mean different outcomes based on the facts and circumstances of a couple’s case.
Recognizing Marital vs. Non-Marital Debt
A divorce proceeding in Minnesota only divides marital debts. Each spouse remains responsible for their non-marital debts. Marital debt includes most debts that a couple acquired during their marriage, such as mortgages, car loans, credit card balances, and medical bills. Non-marital debts include debts that one spouse acquired before marriage or after the couple’s separation and any debts acquired for reasons that did not benefit the marriage, such as debts incurred in furtherance of infidelity.
How Minnesota Courts Determine Debt Division
Under the equitable distribution method, a Minnesota court must divide marital debt fairly, which does not always mean dividing debts evenly. Instead, courts consider various factors and circumstances to determine what a fair split of debt looks like. Some of the things that courts may examine include:
- When either or both spouses incurred the debt
- The purpose of the debt (e.g., household expenses, personal purchases, marital misconduct)
- Which spouse benefited from the debt
- Each spouse’s ability to pay the debt after the divorce
- The division of marital assets
- How prenuptial or postnuptial agreements handle the debt
Special Consideration in Minnesota Debt Division
Other special considerations that courts must account for when deciding debt division in a divorce case include:
- Joint Versus Individual Accounts – Spouses may remain jointly liable for debt accounts in both their names, whereas the court’s judgment may have to order a spouse to pay off an individual account in the other spouse’s name. Furthermore, joint accounts allow creditors to pursue repayment from both spouses, regardless of the court’s division of the debt.
- Hidden or Reckless Spending – Courts may make a spouse responsible for debts that resulted from reckless spending against the other spouse’s wishes or for hidden expenditures that the other spouse did not know about and would not have approved.
- Secured Versus Unsecured Debts – A court may decide to assign a secured debt to a spouse who gets to keep the asset securing the debt, such as a home or car. Conversely, courts usually allocate unsecured marital debts, such as credit card balances, between both spouses.
- Student Loans – By default, student loans constitute a personal debt that the spouse who took out the loan remains exclusively responsible for paying. However, a court may decide to allocate one spouse’s student loan debts between both spouses if it finds that the loans benefited both spouses, such as by funding an education that allowed a spouse to achieve professional and financial success that the other spouse benefited from.
How Can Couples Manage Debt Division Outside of Court
A couple can avoid letting a court decide debt division by negotiating a prenuptial agreement before marriage or a postnuptial agreement after getting married. After a couple begins contemplating divorce or after they file for divorce, they may negotiate a divorce settlement agreement or attend mediation to resolve the question of debts.
Contact a Divorce Attorney Today
When you or your spouse files for divorce, knowing how courts determine the division of debts can help you protect your financial interests. Contact Coodin Law Office, LLC , today for a confidential consultation with a divorce lawyer to learn more about how Minnesota law divides debts between divorcing spouses.