What happens to debt in divorce? Audra Petrolle, family law attorney at Rose Law Group, outlines the process in Arizona

By Sara Stanich, CFP®, CDFA®, CEPA | Kiplinger 

If you are in the process of getting divorced, you know that you’ll need to come to an agreement with your spouse on how to deal with debt and separate yourselves financially. Debt may have been part of the marriage, but hopefully, it won’t be part of the divorce. It’s easier said than done, but the best scenario by far is to pay off your debt before or during the divorce.

Your financial lives usually get jumbled together in the course of a marriage. This includes your financial assets, but also your financial debts or liabilities. Division and responsibility for each will be part of the divorce settlement. Here are some key steps to address during the process.

Make a List

Start by making a list of your debts. A list of liabilities includes:

  • Mortgage
  • Credit cards
  • Auto loans
  • Student loans
  • Personal loans
  • Legal fees
  • Tax debt
  • Any other debts, including loans from family members

Determine Responsibility

Some debts are easier to divide than others. Student loan debt is usually handled by the student. An auto loan might be assumed by the person who takes ownership of the vehicle.

Credit card debt is more difficult. Some cards may have joint responsibility, but many of us also use our individual cards for expenses for the entire family. Division of those debts may be a key financial issue in some cases.


The Rose Law Group Perspective

In Arizona, a community property state, the court will generally divide debts acquired during marriage down the middle absent some sort of written agreement between the parties otherwise, e.g. a prenup or property settlement agreement.

In Arizona a court order, known as a preliminary injunction – precluding either party from transferring, encumbering, concealing, selling or otherwise disposing of joint, common or community property except if related to the usual course of business, necessities of life, or court fees and reasonable attorney’s fees- goes into effect significantly restricting movement of assets during the dissolution. That preliminary injunction also prevents removal of either party from insurance coverage during the course of the dissolution.

So, pragmatically speaking, while debt resolution and reduction may be idea before the divorce is finalized, if you have to use community assets to accomplish that goal prior to the dissolution, then you are going to need written consent from the other party or a court order.

-Audra Petrolle, family law attorney at Rose Law Group

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November 2022