Managing Debt in Divorce:

What You Need to Know in Minnesota

Dividing debt is a critical part of the divorce process, and understanding how Minnesota law treats marital and personal debt is essential. Just as assets are divided, debts must also be allocated fairly between spouses, which can add complexity to an already emotional process.

In this post, we’ll cover key aspects of handling debt in divorce, including what Minnesota laws say about dividing debt, how to protect yourself financially, and tips for navigating debt-related disputes.

Debt Division in Minnesota Divorce

Minnesota is an equitable distribution state, meaning that marital property—and marital debt—are divided fairly but not necessarily equally. The court takes several factors into consideration when determining how to allocate debt, including each spouse’s financial situation and contributions to the marriage.

What Is Marital Debt?

Marital debt is any debt incurred during the marriage, regardless of whose name is on the account. Common examples include:

• • Credit card balances
  • Mortgages
  • Auto loans
  • Medical debt
  • Personal loans

Debt that one spouse accrued before the marriage is typically considered separate debt and remains the responsibility of the individual who incurred it.

How Courts Divide Debt

Under Minnesota law, courts aim to divide both assets and debts in a way that is fair. Factors considered include:

• • Each spouse’s income and earning capacity
  • Who benefited from the debt (e.g., one spouse’s education loans)
  • Who is keeping the asset tied to the debt (e.g., the family home with a mortgage)
  • Whether the debt was incurred irresponsibly or for marital purposes

For example, if one spouse used a joint credit card for personal expenses without the other’s consent, the court may assign that debt solely to the spouse responsible for the charges.

Handling Joint Debt in Minnesota

Joint debts—such as a shared credit card or a mortgage—can be particularly challenging to manage during a divorce. Even after the court assigns responsibility for the debt, creditors are not bound by the divorce decree. This means both spouses may still be legally liable if the debt is in both names.

Options for Managing Joint Debt:

1. 1. 1. Pay Off the Debt Before Divorce: If possible, settle joint debts before finalizing the divorce. This eliminates future disputes and ensures both parties can move forward with a clean slate.
      2. Refinance Debt Into One Name: For debts like a mortgage or car loan, refinancing into the name of the responsible spouse removes the other spouse’s liability.
      3. Close Joint Accounts: Prevent further charges by closing or freezing joint credit cards and lines of credit. This step can protect both parties from additional financial risk.

Protecting Yourself From Debt in Divorce

To safeguard your financial future, it’s essential to take proactive steps during the divorce process.

Steps to Protect Yourself:

• • Monitor Your Credit Report: Regularly review your credit report to ensure there are no missed payments or unauthorized charges on joint accounts.
  • Document All Debts: Create a comprehensive list of all marital and individual debts, including account numbers, balances, and whose name is on each account.
  • Work With a Financial Advisor: A financial professional can help you understand the long-term implications of debt division and create a post-divorce financial plan.
  • Include Debt Provisions in the Divorce Decree: Ensure the divorce decree clearly outlines who is responsible for each debt and the timeline for transferring or refinancing obligations.

Debt and Bankruptcy in Divorce

If one or both spouses are facing significant financial hardship, bankruptcy may be a consideration. However, it’s important to understand how bankruptcy interacts with divorce in Minnesota:

• Before Divorce: Filing for joint bankruptcy before divorce can simplify the process by discharging shared debts, making property division easier.
• After Divorce: If one spouse files for bankruptcy after divorce, creditors may pursue the other spouse for any joint debts, even if the divorce decree assigns responsibility to the filing spouse.

Consulting with both a family law attorney and a bankruptcy attorney is critical to understanding your options and protecting your interests.

Frequently Asked Questions About Debt in Minnesota Divorces

1. Can I Be Held Responsible for My Spouse’s Debt?

You are generally not responsible for debts your spouse incurred before the marriage or for debts assigned to them individually in the divorce. However, for joint debts or debts incurred during the marriage, you may still be held legally liable unless those accounts are refinanced or closed.

2. What Happens if My Ex-Spouse Doesn’t Pay Their Assigned Debt?

If your ex-spouse fails to pay a debt assigned to them in the divorce, creditors can still pursue you for joint debts. In this case, you may need to return to court to enforce the divorce decree or seek reimbursement.

3. Can Debt Be Used to Offset Asset Division?

Yes, Minnesota courts may use debt to balance the division of marital property. For example, one spouse may take on a larger portion of the debt in exchange for keeping a higher-value asset, such as a home or retirement account.

Conclusion: Navigating Debt Division With Confidence

Dividing debt during a divorce in Minnesota can be complex, but with the right preparation and guidance, you can protect your financial future. Understanding how Minnesota courts view marital debt, taking steps to manage joint accounts, and working with professionals can help you navigate this process with confidence.

If you’re facing divorce and have questions about debt division, contact our experienced team today. We’re here to help you navigate the legal and financial complexities of divorce so you can move forward with clarity and peace of mind.