Assets and debts need to be divided when divorcing. However, the amount of debt or asset one spouse wants may be discretionary as long as the parties agree to the division. In other words, if the parties agree, dividing the debt and assets is what you decide so long as it is “fair”. If you want to give your wife the house and just walk away, no questions asked, that is acceptable, so long as you know what you are doing and there is no duress or coercion. However, when drawing up the Marital Settlement Agreement, one issue a judge will look at is “fairness”. Dividing assets and/or debts does not necessarily need to be a 50/50 split, but the courts do not favor one-sidedness. The court will want to know that the person taking on the debt with taking little in assets understands the consequences or responsibility with taking on such debt.
Additionally, the person taking the asset, such as a house, must remember that it may look good on paper, but can you really afford the upkeep of the house, mortgage, home owner’s insurance, taxes, maintenance of the home, etc. It may look as though you are coming out on the rosy side, but working the numbers is telling as to what is possible or not.
It is best when divorcing to work on a Marital Settlement Agreement that both parties can not only live with but afford. In the long run, what good comes if the home is lost to foreclosure and the party who took on the marital debt filed for bankruptcy and is free and clear of the marital debt?
Finally, remember that some creditors are not bound by the Marital Settlement Agreement agreed to by the parties. Joint and individual liability still exists for some creditors. It is best to know if the debt is in both names, just one parties’ name or if the credit card company, for example, is able to come after the ex-spouse for repayment.