The Mutual Financial Obligations of Divorced Couples

by Rob Jennings J.D.
The conclusion of your divorce doesn't necessarily mean the end of your mutual financial obligations.

The conclusion of your divorce doesn't necessarily mean the end of your mutual financial obligations.

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Marriage can be as much an economic union as a personal one. Because of this, married couples sometimes have mutual financial obligations that continue even after the entry of a divorce decree. Mortgages, car loans, credit cards and other obligations that the parties took in both names during marriage will continue after divorce, unless the parties pay them off or refinance them.

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Property and Debt Division

Each state's family law code contains provisions governing the division of marital property and debt in a divorce. In the nine community property states, courts divide the marital estate equally. In the 41 equitable distribution states, courts divide the estate equitably, or fairly. Since fair and equal sometimes mean different things, equitable distribution courts can sometimes award unequal divisions. In some states -- such as California -- a court can issue a divorce decree without resolving a couple's outstanding financial issues. In these cases, both parties are responsible for maintaining properties and keeping debts current until all pending issues are resolved.

Joint Property

"Dividing" jointly-owned property doesn't always mean selling it and splitting the proceeds. In many jurisdictions, a court can achieve a desired division by allocating debts and assets between the parties without selling anything. Some parties are able to resolve their property and debt disputes outside of court with a marital settlement agreement. As part of their contract, the parties can sign over titles to cars and homes and, if their credit lets them, refinance loans. With real estate, parties may choose to keep the property jointly titled until it is sold at some point in the future, reaching an agreement as to both possession of the premises and payment of the mortgage pending sale.

Joint Debt

No matter what a couple agrees to in a marital settlement agreement, typically a lender can hold both parties responsible as long as both names remain on an obligation. This holds true for mortgages, car loans, credit cards and all other forms of joint debt. Judges can allocate debt between parties but cannot unilaterally absolve either party of responsibility. Absent the agreement of the lender, it generally takes a refinance to remove one party's name from a debt.

Children

In addition to property and debt, some separating couples have to deal with supporting their children. As with most aspects of family law, child support is governed almost entirely by the unique laws of individual states. Each state has guidelines that take into account the incomes of the parties and various additional factors, such as health insurance, daycare and extraordinary expenses, to calculate an amount of support for one parent to pay the other. In some places, a court can order -- or the parties can agree -- that the parent paying support will carry life insurance in a specified amount for the duration of his obligation.