How is Debt Divided in a Divorce in Illinois? How debt is divided in a divorce can depend on who is responsible for the debt and the spouses’ situation and preferences. However, the division should be equitable. Courts in Oakbrook Terrace and the rest of Illinois consider fairness instead of a black-and-white 50/50 split. Spouses usually share marital debts, although the sharing may not be 50/50. Meanwhile, each spouse typically is responsible for debts he or she took on before the marriage. Courts assess the spouses’ financial situation, contributions to the debt, and earning potential when deciding how to allocate debt.
Are you worried about the fair division of debt? Call Erlich Law for a consultation.
What Debts Are Divided in Divorce?
Illinois uses equitable distribution rather than community property. Equitable distribution means the fair division of debts, not necessarily the equal distribution of debts. Meanwhile, in community property states, the division of marital debt is closer to 50/50.
Marital debts usually get divided in Illinois divorces. However, defining a marital debt can be tricky.
Marital Debts
Marital debts are those that a spouse or the spouses together incurred during the marriage. Common examples include joint loans, credit card balances, home mortgages, and car loans. Courts generally consider a debt to be marital if both spouses benefited from it or if it was necessary for the family.
What if the spouses signed jointly for a debt, but only one made payments? Under Illinois law, both spouses are still typically responsible for the debt.
The situation may be different for debts that one spouse took on without the other spouse knowing about it or consenting to it. Proving a lack of consent can include emails and loan applications showing that one spouse did not authorize the debt. Likewise, showing that the spouse who took on the debt managed it from a bank account the other spouse could not access may constitute similar proof.
Non-marital Debts
How debt is divided in a divorce depends on whether the debt is non-marital. Non-marital debts are those that the spouses incurred before getting married or after they separated legally. For example, one spouse’s student loans and credit card debt from individual accounts opened before the marriage are likely to remain that person’s responsibility. Non-marital debts usually do not get divided in a divorce, and prenuptial agreements may also specify non-marital debts.
Factors Considered in Debt Division
The spouses may negotiate debt division between themselves, or the court may decide it. Either way, these factors commonly come into play:
Each Spouse’s Financial Situation and Income
If one of the spouses has significantly greater earning power or more non-marital assets, the court may allocate more of the debt to that spouse.
Contribution to Debt
How debt is divided in a divorce also depends on the spouse’s contribution to the debt. One spouse might be responsible for accumulating 100% of the credit card debt, or may have taken out loans for business ideas only the spouse pursued.
In such cases, the court may assign the debt to that spouse. Debts for personal interests that did not benefit the family are more likely to be assigned to the spouse who incurred them.
Prenuptial Agreement
If the spouses have a prenuptial agreement, it may govern the division of their debt. Courts usually honor these agreements unless one spouse proves they are unfair or were created under duress.
Length of the Marriage
For shorter marriages, courts may be more likely to separate debts according to each spouse’s individual responsibilities. This can especially be the case when one spouse primarily took on the debt.
Longer marriages tend to mean more financial entanglements. Courts may allocate debts in a manner that considers both spouses’ needs and financial contributions to the marriage.
The Asset Linked to the Debt
Some debts, such as car loans and mortgages, are linked to assets. That may affect how debt is divided in a divorce. Often, the court assigns that debt to the spouse who is keeping the asset.
If one spouse keeps the marital home, he or she may also take on the mortgage responsibility. In Illinois, the median monthly amount of housing costs for owners with a mortgage is $1,903. The amount drops to $737 without a mortgage.
Can Spousal Support or Child Support Affect Debt Division?
Spousal or child support can impact debt division, although indirectly. For example, if one spouse pays permanent spousal support, the court may reduce that spouse’s share of marital debts to keep the support payments as feasible as possible.
A parent who pays child support may get fewer marital debts, too, especially if he or she is also covering the children’s health insurance and other child-related expenses. Of course, many considerations such as the spouses’ incomes and overall financial resources go into the court’s decisions.
What Are the Different Methods of Debt Division in Illinois?
Spouses have several ways to fairly divide debts in a divorce. Approaches depend on what they negotiate or what the court orders in light of their situation.
It is important to choose the right lawyer for debt division, especially if one or both spouses dispute the nature of debts or assets. For example, one spouse may dispute that a debt is non-marital. The right attorney can make a major difference in the outcome of the divorce.
Direct Assignment
Each spouse is responsible for his or her individual debts, while fairness considerations apply for joint debts in both spouses’ names. For example, a credit card debt in the name of one spouse could be the sole responsibility of that spouse, while a mortgage that both spouses jointly owe might be divided depending on individual financial circumstances.
Equitable Distribution Based on Assets
Debt division rarely occurs without the consideration of asset division. Under Illinois law, debts offset assets. The court may counterbalance any asset it awards to one spouse by assigning the corresponding debt or a debt of a similar amount to the spouse.
Asset Sale
Both spouses may prefer to sell marital assets and use the proceeds to pay off debts in divorce. The spouses must agree on which properties, investments, and valuables they are liquidating and at what price. One advantage of this method is eliminating joint obligations, which lets the spouses move on without lingering debts they share with each other.
Debt Buyout
A debt buyout may govern how debt is divided in a divorce. One spouse may offer to take on the entire debt load in exchange for more assets, or a higher value of assets. This outcome may happen through a marital settlement agreement in uncontested divorces. Couples agree on terms without court intervention, and debt buyout can simplify the divorce since it reduces ongoing joint obligations.
How much does an uncontested divorce cost? The cost in Oakbrook Terrace varies, but uncontested divorces tend to be much more affordable than contested divorces. If both spouses agree on issues such as debt division, the divorce in total may cost as little as $2,500, depending on the complexity of the couples’ situation.
Refinancing or Consolidation
Refinancing may allow one spouse to take on a debt such as a mortgage fully. This releases the other spouse from the debt and ensures that a lender has approved the spouse taking on the responsibility.
In debt consolidation, the debtor rolls multiple debts into a single loan or line of credit. It can make debt division easier by consolidating payment responsibilities to a single account.
Using a Lawyer for Debt Division in Oakbrook Terrace
An uncontested divorce lawyer is a good idea if both parties agree on debt division terms or want to work toward that outcome. Ask prospective lawyers questions relevant to your financial situation. For instance, if you and your spouse disagree on defining marital and non-marital debts, discuss with attorneys how they resolve these issues. If you foresee a contested divorce, be sure to ask prospective attorneys questions about their experience in divorce litigation.
For parties considering an uncontested divorce, a marital settlement agreement attorney can help with drafting a clear agreement. Clarity is necessary to prevent misunderstandings or conflicts later. Unambiguously defining rights and responsibilities in areas such as debt division, child custody, and spousal support should also result in a smoother divorce and transition to post-divorce life.
As far as marital settlement agreement vs. divorce decree, the MSA is the agreement between the spouses in an uncontested divorce. It outlines issues such as the division of assets and debts. On the other hand, the divorce decree is the final court order legally ending the marriage. It may mention the MSA.
Divorce is stressful. Contact us at Erlich Law to get answers about how debt could be divided in your divorce.
