How Is Division Of Debt Handled In A Colorado Divorce?

In Colorado, the division of debt during a divorce is governed by the principle of “equitable distribution,” which aims for a fair, though not necessarily equal, allocation of marital debts between spouses. This approach considers various factors to determine an equitable division based on the unique circumstances of each case.

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Marital vs. Separate Debt In Division Of Debt

The initial step in dividing debt involves distinguishing between marital and separate debts:

Marital Debt: Debt incurred by either spouse during the marriage, regardless of whose name is on the account, are typically considered marital debts. This includes obligations such as mortgages, car loans, credit card balances, and other liabilities accumulated from the date of marriage until the date of legal separation or divorce.

Separate Debt: Debt acquired before the marriage or after legal separation are generally deemed separate and remain the responsibility of the individual spouse. For example, a student loan taken out before the marriage would usually be considered separate debt.

Equitable Distribution of Debt

Colorado’s equitable distribution framework does not mandate a 50/50 split but seeks a fair division based on several considerations.

Economic Circumstances: The financial status of each spouse at the time of division, including income, earning potential, and overall economic situation, is evaluated.

Contribution to Marital Estate: Both financial and non-financial contributions to the acquisition and maintenance of marital property and debt are assessed. This encompasses income earned, homemaking efforts, and other supportive roles.

Increase or Decrease in Value of Separate Property: Any appreciation or depreciation in the value of separate property during the marriage, as well as the depletion of separate property for marital purposes, is considered.

Purpose and Incurrence of Debt: The reasons behind incurring certain debts are scrutinized. Debts accumulated for marital purposes, such as household expenses or family vacations, are typically treated as marital debts. Conversely, debts incurred for non-marital purposes, like financing an extramarital affair or gambling, may be assigned solely to the responsible spouse.

Specific Considerations For the Division Of Debt

Student Loans: Debts from student loans taken out during the marriage can be complex. While some argue that the education benefits the marital unit, others contend that the individual primarily gains from the degree. Courts may consider factors such as the timing of the loan and the degree’s impact on the family’s financial situation.

Post-Separation Debt: Debts incurred after separation but before the finalization of the divorce may still be considered marital, depending on their purpose. For instance, debts for necessary living expenses might be shared, whereas those for personal indulgences may not.

Protecting Your Financial Interests

It’s important to note that creditors are not bound by the divorce decree. If a debt assigned to one spouse in the divorce remains unpaid, creditors may pursue the other spouse if their name is associated with the debt. To mitigate this risk, it’s advisable to:

Refinance Joint Debts: Whenever possible, refinance loans to remove one spouse’s obligation, ensuring that debts assigned to one party are solely in their name.

Close Joint Accounts: Closing or converting joint credit accounts to individual ones can prevent future liabilities.

Monitor Credit Reports: Regularly reviewing credit reports can help detect any issues arising from debts assigned during the divorce.

Legal Assistance

Given the complexities involved in dividing debts during a divorce, consulting with a family law attorney experienced in Colorado’s divorce laws is highly recommended. An attorney can provide guidance tailored to the specific circumstances, ensuring that the division of debts is handled appropriately and that one’s financial interests are protected.