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How debts are allocated in a divorce

On Behalf of | Mar 15, 2022 | Property Division |

Wisconsin is a community property state, and thus debts that were accumulated during a marriage will generally be split equally between both parties in a divorce settlement. However, couples can negotiate a different type of division rather than leaving it up to the judge.

How credit card and medical debts are split in a settlement

Credit card and medical debt balances are classified as unsecured balances. This means that no collateral was used to secure the loan, which means that your lender may have limited options as it relates to obtaining repayment. In many cases, unsecured debts will be split 50/50 unless there is reason to believe that doing so is unfair. For instance, if your spouse was the one who had a medical emergency, he or she may be the one required to pay the resulting medical bill.

How auto and home loan balances are split in a divorce

The property division process tends to be different for secured debts such as an auto or home loan. If you have positive equity in the underlying asset, it may be best to simply sell it and use the proceeds to pay the remaining balance. Any amount remaining after the lender has been paid will likely be split 50/50 unless a prenuptial or postnuptial agreement says otherwise. Alternatively, you can take ownership of a car or home with the understanding that you will be the one responsible for paying any outstanding loan balance.

A divorce may have a significant impact on your finances, and this may be especially true if you are responsible for paying marital debts. A financial adviser may be able to help you create a budget that allows you to maintain a reasonable lifestyle after your divorce.