During a divorce, are there creative ways to protect assets? The court will ensure an equitable division takes place to safeguard your interest. A house is an asset in a marriage. To complete the formalities of ownership, the couple purchases the home. Informal interests do exist occasionally. Someone—perhaps an uncle—might have contributed funds to purchase the home. A down payment may have been made by someone. No written documentation exists. You will divide your possessions and liabilities eventually in the divorce. Certain parties will be excluded if you don’t address these informal interests.
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You should have already covered those informal transactions before the divorce is finalized. As proof, you should have items like an IOU or a receipt. This will offer proof that the transaction truly took place. You can set money aside during the asset division phase of your divorce to settle the debt.
What assets do you need to protect in a divorce?
Most of your possessions—or your spouse’s—were accumulated during your marriage. If there is a title or deed, it doesn’t matter whose name is on it. It remains marital property unless it was a gift or inheritance. You both own everything that is marital property.
If you and your spouse cannot agree on how to divide your property, the judge will make the decision. In Michigan, courts must divide property fairly. Fairness generally means that everyone receives roughly half of everything. A judge may decide that it is acceptable to divide marital property in different ways.
The court has the discretion of determining what is reasonable. If the marriage’s dissolution was primarily the fault of one partner. Or, if one spouse demanded more property, your assets might be divided unevenly. While accumulating higher marital debt, one partner may also amass bigger marital assets.
Separate property refers to items that are not marital property. Property owned by one spouse before marriage is considered separate property. It is separate property if one spouse receives a gift or inheritance. It stays separate while the marriage is still active. A spouse’s separate property increases in value on its own. The net increase in value is considered to be separate property. In a divorce, spouses often keep their respective separate property. Separate property, however, may be subject to property division in certain circumstances.
In protecting your property during divorce, your goal is to keep your separate property separate. And to get your fair share in the martial assets during property division.
What debts should be shared?
The marriage debt is split fairly between the two partners. This often means that each person is responsible for paying around half of the overall debt. A judge can determine specific circumstances to split debt in a different method.
In the following scenarios, there may be an unequal debt distribution:
[ a ] One party is more to blame for the breakdown of the marriage.
[ b ] One individual can afford to pay more, or
[ c ] One spouse incurs debt such as one spouse’s gambling debt. The debt incurred without the other spouse’s approval. The gambling spouse is accountable for the gambling debt.
[ d ] Sometimes one spouse acquires more property while taking on more debt.
Separate debts are those that one spouse racked up before becoming married. Generally speaking, any debt incurred during a marriage is a marital debt. No matter who made the purchase or whose credit card was used, it doesn’t matter.
Some situations defy this generalization. Debts incurred through gambling or extramarital affairs are not marital debt. Paying restitution in a criminal case does not fall under the category of marital debt. Student loan for one spouse taken out during the marriage is a separate debt. But they can be considered marital debt if student loans were used to maintain the family.
The recipient of a property usually takes on the debt attached to the property. The person may continue to own the property. The person who can afford to fulfill the associated financial commitment gets to keep it.
Where do your creditors stand in your debt division?
The court presiding over your divorce has no authority over your creditors. You owe money to your creditors. Your divorce decree may assign each debt to either you or your spouse. Joint debts that are owed to creditors in both of your names may still be treated as such.
A list of all debts in both of your names must be included in the divorce judgment. If the person ordered to pay the debt doesn’t, the other spouse can request that the judge enforce the order. You can submit a motion asking the judge to order your spouse to reimburse you. This is a form of reimbursement if you wind up paying a debt that was assigned to your spouse.
The creditor is free to appeal the judge’s decision. If they determine that just one spouse is solely responsible for a debt. Any debt owing to the creditor by either spouse or both spouses may be collected by the creditor. The creditor can use any legal means to do so. It doesn’t matter if spouses co-signed the agreement or whether only one party entered into it. Non-paying spouses can only dispute the paying spouses by claiming contempt of court against them.
In Michigan, the following considerations are taken when dividing a couple’s debt:
The length of the marriage.
A judge may attempt to return both parties to their pre-marriage financial situations. Especially with marriages lasting an abnormally brief period. Marriages of only five years or less. The court does it in such a way that each person leaves the marriage with roughly the same amount of debt.
The spouses’ capacity to pay the debt.
The court makes sure no one carries an undue burden. The court considers each spouse’s income and potential earning capacity in allocating debt.
How the spouse acquired the debt.
A gambling habit that resulted in the debt. This kind of debt may be allocated exclusively to the person who incurred them.
Why debt was acquired.
Sometimes the motive for the debt is taken into consideration, such as when it was incurred as part of an affair.
Where the property or asset is going to end up.
To maintain the integrity of the property division, the debt must go with the asset. It is likely that if the family automobile goes to one spouse, the debt from the car loan will go with the car. The party getting the majority of the marital assets can end up paying a larger share of the marital debt. The majority of the time, this choice is made when one spouse receives a much larger share of the marital estate. An example is a home. The party getting the home must assume responsibility for the mortgage payments.
You and your spouse can, and ought to, try to settle the different issues of your divorce peacefully. Resolve issues on how to divide marital assets including debts. You can resolve this between you two with your respective attorneys. Or with the help of a trained and reputable mediator.
If you can reach a fair arrangement, you can memorialize it in a written document. This document is known as a “separation agreement” or “property settlement agreement.” You can ask the judge to incorporate it in the divorce decree. You can save time, stress, and money this way.
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