What Happens To Debt In Divorce?

What Happens To Debt In Divorce?

Understanding What Happens To Debt In Divorce

Divorce is a daunting process with its own set of complexities. One of these complexities that often leaves couples in a quandary is the question of “What Happens To Debt In Divorce?” Misconceptions and misinformation abound, but it is crucial to comprehend the financial implications. Herein, we will explore the intricacies of debt during divorce and provide a clear understanding of the responsibilities of each party.


The dissolution of a marriage is not only emotionally taxing, but it also brings with it financial implications. One such implication that often causes confusion is the division of debt. With misinformation running rife, it is essential to understand the nuances of what happens to debt in divorce.

The Common Queries

Couples facing a divorce often seek clarity on two common questions:


  • Are they liable for their partner’s debt because they were married?
  • How can they resolve their accumulated debt to avoid prolonged disputes after their divorce is finalized?


The answers to these questions depend on two primary types of debt: joint and individual.


Understanding Joint Debt

Joint debt refers to a financial obligation where more than one party is a co-signer. This could be a loan, credit card, mortgage, or any other form of debt where both spouses share equal liability.

In cases of default, the lender can take steps against any or all parties to recover the owed amount. During a divorce, an agreement may be made, either informally or mandated by the court, to divide the debt between the spouses equally. However, this agreement only binds the spouses and not the lender. If one party defaults, the lender can still pursue the other party for payment.


Grasping Individual Debt

On the other hand, individual debt is a financial obligation where only one person has signed for the debt. The agreement is strictly between the individual and the lender. If this person defaults on their payments, the lender cannot go after the other spouse for the payment.

Even though this debt may have resulted from purchases made by both spouses, it doesn’t affect the debt ownership. Some couples might choose to create separation agreements, where each spouse agrees to pay a portion of an individual debt, but the lender will still only pursue the person who owns the debt in case of default.


The Divorce, Debt, and Bankruptcy Triad

The implications of debt after divorce extend beyond simply deciding who pays what. The benefits of shared income and expenses in a marriage generally make it easier to manage debt payments. However, once separated, these costs can be overwhelming for a single individual, leading to bankruptcy or consumer proposal.

If one spouse declares bankruptcy, the full burden of any joint debts falls on the other spouse. This can significantly increase their debt, delay their journey to being debt-free, or worse, drive them into bankruptcy as well.


The Role of a Licensed Insolvency Trustee

Coping with debt in a divorce can be challenging. But with the help of a Licensed Insolvency Trustee, you can explore various options. They can provide you with a confidential consultation and guide you towards a debt solution that might be the right fit for your situation.



Divorce signifies a fresh start, not just emotionally, but also financially. If you find yourself questioning what happens to debt in divorce, it is essential to seek professional advice. Understanding the intricacies of joint and individual debt and the implications of bankruptcy can help you navigate the financial complexities that come with a divorce.

Remember, you’re not alone in this journey. Reach out to a Licensed Insolvency Trustee to explore your options and find a debt solution that suits your needs.

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