How to split debt during divorce

On Behalf of | Sep 16, 2022 | Divorce

Kentucky courts divide assets and debts as part of divorce settlements. While many worry about who gets the house, cars or other high-value assets, they should also worry about marital debt, which includes mortgages, car loans and credit cards. Both parties share the responsibility of repayment, but the split is similar to splitting assets in that it is fair and equitable.

While splitting debt can be challenging, but is generally recommended that the couple pay off all marital debt before the divorce is final. It makes for a clean break and protects future assets – a shared debt follows the couple after divorce, and the budget-minded spouse may find themselves stuck with the debt because their ex did not make payments. However, it is also not always possible to pay off a significant debt like a house. The following tips provide options for managing certain debts in divorce without wrecking your finances.

The house

If one spouse wishes to stay in the house, it is best to refinance – one spouse has the title and is responsible for mortgage payments. If both spouses need the capital to get new homes, they can sell home. If one spouse cannot afford to refinance on their own, the other spouse may keep their name on the title but not be responsible for the payment. They can negotiate other specific options as well.


When married couples make large purchases, such as cars, RVs, watercraft and off-road vehicles, they might obtain loans to cover costs. Couples have two options for splitting the debt:

  1. Sell the items, pay off the loans, and split the proceeds equitably
  2. One person gets a new loan for the entire amount of the equipment or vehicle

Individual owners should also retitle the car in their names.

Revolving credit

Any credit card debt incurred during the marriage is split evenly in divorce, regardless of who made the purchases. The easiest way to accomplish this is to pay off the balances before completing the divorce. It is also the most intelligent approach because it eliminates high-interest loans. If this isn’t done, both parties remain liable for the marital purchases. One way to avoid this is to apply for new credit cards and transfer equal shares from the joint account.

School loans

Who pays for school loans depends on when the loans began. Student debt accrued before marriage remains the applicant’s responsibility, even if joint funds covered the payments during the marriage. However, loans obtained during the marriage, even by one spouse, require repayment by both parties. Divorced couples may try getting new individual loans for their half or use profits from a home sale to pay off the student debt.

Guidance often necessary

Dividing assets and debts involve some give and take. One or both spouses may not understand the long-term financial impact of these decisions, so it is essential to discuss their options with an experienced family law attorney who can guide their client through the entire process.