Divorce involves the division of assets and the allocation of debts. Understanding how marital debt is classified and divided in North Carolina is crucial for both parties to achieve a fair and equitable resolution. Here’s what you need to know about handling debt in a North Carolina divorce.
Marital vs. Separate Debts
In North Carolina, debts are categorized into two types: marital and separate.
Marital Debt
Marital debt includes all debts incurred by either spouse during the marriage, regardless of whose name is on the debt. This can include:
- Credit Card Debt: If a credit card was used during the marriage for household expenses, it is generally considered marital debt.
- Mortgages: Any mortgage debt on the family home or other real estate purchased during the marriage.
- Loans: Car loans, personal loans, and other debts taken out during the marriage.
Separate Debt
Separate debt includes any debt that one spouse incurred before the marriage or after the date of separation. It also includes debts incurred solely for one spouse’s benefit or non-marital purposes. Examples include:
- Pre-Marital Debt: Any debt one spouse brought into the marriage.
- Post-Separation Debt: Debts incurred after the separation date.
- Individual Expenses: Debts from gambling, luxury purchases, or personal endeavors unrelated to the marriage.
How Courts Divide Debt in North Carolina
North Carolina is an equitable distribution state, meaning that the division of assets and debts should be fair but not necessarily equal. The court considers several factors when dividing marital debt, such as:
- Income and Property of Each Spouse: The court looks at the financial status of each spouse, including their income, property, and resources.
- Contributions to the Marriage: Both financial and non-financial contributions, like homemaking and child-rearing, are considered.
- Debt Responsibility: Who is more responsible for incurring the debt, and who has the greater ability to pay it off?
- Duration of the Marriage: The length of the marriage can influence how debt is divided.
- Health and Age: Each spouse’s physical and emotional health can also be a factor.
Special Considerations
Joint Debts
Both parties are usually held responsible for debts in both spouses’ names, such as joint credit cards or co-signed loans. Even if the court assigns the debt to one spouse, creditors can still pursue both parties for repayment. It’s important to close joint accounts and refinance loans in one person’s name when possible.
Student Loans
Student loans taken out before the marriage are typically considered separate debt. However, student loans incurred during the marriage may be considered marital debt, especially if both spouses benefited from the education.
Business Debts
If one spouse owns a business, debts related to the business are typically considered marital debt if the business was started or expanded during the marriage. The court will assess the value of the business and any associated debts.
Protecting Your Financial Future
Understanding how debt is divided in a North Carolina divorce is crucial for protecting your financial future. Here are some steps to take:
- Document All Debts: Keep thorough records of all debts, including statements and account balances.
- Negotiate: Try to reach an agreement with your spouse on how to divide debts amicably.
- Consult an Attorney: A family law attorney can help you navigate the complexities of debt division and advocate for your interests.
Conclusion
Debt division is a critical aspect of divorce that requires careful consideration and understanding. In North Carolina, the distinction between marital and separate debt plays a significant role in how debts are allocated. By knowing your rights and responsibilities, you can work towards a fair distribution and protect your financial well-being.
Carolyn Bellof
Carolyn Bellof is a Certified Family Law Specialist in North Carolina. She brings empathy and a personal understanding of loss and resilience to her clients, ensuring their legal needs are protected during emotionally challenging family law proceedings.
If you need assistance with your divorce and debt division, contact Stallard & Bellof today. Our experienced family law attorneys are here to help you navigate the process and achieve a fair outcome.
