The division of debt in an Arizona divorce can be complicated. Issues in division include characterizing the debt as marital or separate, deciding whether one spouse is entitled to reimbursement for payment of debt, and dividing debt equally in accordance with Arizona’s community property laws. If a couple incurs debt jointly, but one spouse is assigned that particular debt in the divorce, there may be concerns about the other spouse’s liability in the event the spouse who was assigned the debt files bankruptcy. The advice of an experienced Arizona family law attorney is can be invaluable if there is significant debt to be divided.
Identifying Community and Separate Debt
Because only marital, or community, debt is subject to division in an Arizona divorce, the first issue to address is whether a particular debt is community or separate.
As a general rule, community debts are incurred during the parties’ marriage. Even if only one party incurred the debt, community debts are considered to belong equally to both parties (just as community property belongs to both parties regardless of who earned it). Separate debts are those incurred before the marriage date, or after a party was served with divorce papers. As the name implies, they are the sole responsibility of the person who incurred them.
Sometimes, identifying whether a debt is community or separate is a straightforward exercise. Other times, however, the analysis is less clear. Often, parties had debt prior to the marriage and added to that debt after marriage. Division of the debt can also be complicated due to the fact that creditors are not bound by the Arizona court order with respect to who is responsible for the debt.
Experienced Arizona Debt Division Attorneys
Separate property and community debt are far from simple concepts. Pre-nuptial agreements may have clauses allowing separate property or debts to be treated as community property. Once the spouses decide to end their marriage, they are free to work out their own settlement, dividing the property and paying off debts. In other words, the parties can change the statutory rules through their own contract, as long as the contract is fair and reasonable.
Generally, debts incurred before the marriage remain the separate property of each spouse, and do not form part of the marital community. Creditors are unable to reach one party’s separate property in order to pay the other’s separate debt. However, creditors can seek payment from a spouse for a community debt that one spouse failed to pay. It is important that Arizona residents know the nature of their assets and debts before filing a petition for separation or divorce. Both parties must provide full disclosure of both assets and debts, because assumptions and misunderstandings will only lead to problems for both parties in the future.
Division Upon Divorce
Despite the general rule is that all of the property is subject to equitable division, this presumption can be rebutted in instances of marital waste or other facts that make “equitable distribution” something other than 50% to each spouse.
Property division is NON-MODIFIABLE. This means that if you enter into an agreement or a judge enters an order for property division, you cannot go back and ask for a reallocation of those assets (with several exceptions). It is therefore extremely important to do your due diligence in researching your assets and their value, and to present your property information clearly and concisely to the judge.
At Shaffer Family Law, we have handled hundreds of divorces and have extensive experience with the division of community debt in divorce, and with factors that can complicate the division of debt. We are skilled negotiators, and always attempt to conserve client resources by crafting a mutually acceptable settlement of debt issues. Where settlement is not possible, or not in our clients’ best interests, however, we have the legal knowledge and courtroom experience necessary to protect our clients’ interests at trial.
Family Law Attorneys Serving the Valley and the Surrounding Communities
The family law attorneys of Shaffer Family Law serve the entire Valley and the surrounding communities, including Pinal, Pima, Yavapai and Coconino counties. Contact Shaffer Family Law online or call (480) 470-3030 today to consult with us about the division of community debt in your divorce.