How Secured Liabilities and Joint Debt Are Handled in a Divorce

Clients of a Westwood family law attorney often have questions about secured debt following a divorce.

How Secured Liabilities and Joint Debt Are Handled in a DivorceUnderstanding Secured Debt and Why It Is Customarily Joint Debt 

During divorce, property division is a major consideration.  In Massachusetts, property division, including debt, must be equitable – meaning  the distribution of assets and liabilities must be fair. The court considers a number of factors in this analysis, so don’t assume that everything is just divided “50/50” because the analysis is more involved.

When couples make purchases that involve debt, whether it is a home or an item purchased through a credit card, they commonly accrue debt jointly. When one spouse maintains ownership of the asset, then any related debt must be taken into account. For example, if a car loan is in both names, but only one spouse maintains the ownership of the car,  other concerns must be considered.  With certain purchases, it might be impossible to remove financial liability from the spouse who surrenders the asset. One  reason for this is that it is not always possible to convince the lender to remove a debtor from the agreement. Understandably, lenders often show a reluctance to do so because they would rather be able to have two people to collect from as opposed to one.   Additionally, one person;s income may not be able to support the payment, or the individual may be a higher credit risk.

Sometimes, the party that is keeping the asset and its debt might be able to refinance. Divorce can hurt a person’s finances significantly and sometimes a person may not have the income  available to refinance a particular debt. The person who is not keeping the asset will be subject to contingent liability, and if the spouse holding the asset doesn’t pay, the other will be liable.

In some circumstances, the parties may be able to work with their divorce lawyer or divorce mediator to reach an agreement on this issue.  For example,  the spouse who has the contingent liability (but not the asset)  could negotiate additional assets or other concessions as compensation for the risk of remaining liable to the creditor.

Contact an Experienced Westwood Family Lawyer
If you have questions about secured liabilities and joint debt, or any issues surrounding property and debt issues relating to your Massachusetts divorce,  contact family law attorney and mediator Stephen McDonough at Next Phase Legal by calling 508-359-4043.