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North Carolina courts classify debt as marital, separate, or divisible. Marital debt includes loans, credit cards, mortgages and other obligations or financing either spouse took on during the marriage, even if the other was unaware, unless a judge determines otherwise. Separate debt includes any debt a spouse had before marriage or took on after separation. Divisible debt includes marital debt accumulated after separation but before the divorce is finalized, such as interest, taxes or finance charges.
Who Is Responsible for Marital Debt?
Both spouses share responsibility for marital debt, even if only one name is on the account. Courts assume that debt acquired during marriage was for the benefit of both spouses. However, a judge can assign more debt to one spouse if the situation calls for it. For instance, if one spouse accumulated debt recklessly, such as for gambling or during an affair, the court could assign that debt to them alone.
How Courts Divide Debt in a Divorce
North Carolina follows equitable distribution principles during asset division in divorce cases, which means judges start by assuming a 50/50 split of marital debt. However, a judge may order an unequal division based on each spouse’s income, financial needs, and role in accumulating the debt. Courts also consider whether one spouse wasted marital funds. Judges do not divide separate debt—each spouse remains responsible for their own separate debt.
How Separate Debt Is Handled in Divorce
Separate debt belongs to the spouse who took it on. If a spouse had a loan or credit card before marriage, they must continue paying it after divorce. Debts taken on after separation also remain with the spouse who created them. However, if a spouse took on new debt to cover family expenses, or childcare costs prior to a support order, a judge may decide that part of the debt is marital or potentially divisible.
Divisible Debt: What Happens After Separation?
Most states identify only two kinds of assets in divorce cases: separate and marital. North Carolina, however, recognizes a third kind called divisible assets. Divisible assets, which include divisible debts, are any assets or debts accumulated by either spouse between their initial separation and the final divorce order. This covers interest, late fees, taxes and other finance charges added to existing marital debts. Courts look at whether one spouse’s actions caused an increase in debt when deciding who should pay divisible debts.
What Happens to Joint Credit Accounts?
Separation agreements do not change the terms of joint credit accounts with the account holder, but can be persuasive in a court. If both spouses signed for a loan or credit card, the lender can collect from either person, no matter what the separation agreement or eventual Equitable Distribution Order says. Spouses should close joint accounts or transfer balances before finalizing the divorce to avoid future issues. Otherwise, late payments can hurt both credit scores even after an order is entered or the divorce is finalized.
Can a Spouse Be Held Responsible for the Other’s Reckless Spending?
Courts typically assign reckless spending debt to the spouse who created it. If a spouse used marital funds for gambling, luxury purchases, or an affair, a judge may allocate more debt to that spouse in the divorce. However, routine spending, even if one spouse disagrees with it, does not count as reckless. The court will look at financial records to determine how the debt was used.
The Role of Prenuptial and Postnuptial Agreements in Debt Division
A prenuptial or postnuptial agreement can outline how spouses will divide debt if they divorce. These agreements can state that certain debts will remain separate or that one spouse will take responsibility for specific obligations. Courts generally follow these agreements unless they are unfair or invalid. If a couple doesn’t have a prenuptial or postnuptial agreement, the court will decide debt division based on North Carolina’s equitable distribution laws.
Contact a North Carolina Divorce Lawyer Now
A North Carolina divorce attorney from Patrick, Harper & Dixon can help you protect your finances and avoid unfair debt obligations during and after your divorce. We can review your debts, explain your rights, and work to facilitate a fair division of financial responsibilities. If needed, we can also help you take steps to protect your credit and future financial stability. Contact our firm today to begin your initial consultation and discuss your next steps.
