What Happens to Debt in Divorce in Minnesota?

IOUMinnesota’s equitable distribution statute does not specifically refer to the division of debt.  ( Minn. Stat. Section 518.58) Debts can be marital or non-marital. For example, significant debt incurred before marriage could be determined to be non-marital debt.  Debts incurred during the marriage are marital unless the court finds otherwise.   Courts look to several factors in determining the nature of the debt.  For example, a court will examine the following: 1. When was the debt incurred? 2. What is the debt and why was it incurred? And,  3.  Who benefitted from the debt; specifically, did the other party not incurring the debt benefit?  The court will also look to see who may be in a better position to assume the debt financially.   The court will look to the foregoing factors and circumstances in determining if a debt is marital or non-marital and in assigning payment of the debt to one or both parties

If a debt is marital, then the usual rule is to divide up the payment of the debt between the parties. Debt can be divided just as assets can be divided.  Minnesota is not an equal property state like California where everything is divided 50/50.  Minnesota is an equitable property state.   Minnesota courts can divide up debt in an unequal or equitable ( fair) manner.  Minnesota courts can require that one party pay more than the other party.  Once again, the court will look to the reason for and the circumstances of the debt.

Business debt, student loans, and loans from family members are allocated between the parties as well.  Analysis of these debts is more complex.

The Bankruptcy Code allows that debts owed to a former spouse are not dischargeable in the bankruptcy proceeding.  Most divorce decrees include a hold harmless provision when assigning debt to one party. The party taking on the debt has to hold the other party harmless from payment of the assigned debt.

Creditors will often pursue the former spouse when one party discharges unsecured debt assigned to him or her. The former spouse may have an action to change spousal maintenance or child support based upon the change in circumstances; specifically, the change in circumstances in which the former spouse now being held liable to creditors for debts discharged by one party.

Kate Willmore

Saint Cloud, Minnesota, Family Lawyer & Mediator

(320) 217-6030   kaw@katewillmorelaw.com

www.katewillmorelaw.com         www.katewillmoremediation.com             www.katewillmorewillstrusts.com

Copyright 2013

About Kate Willmore, Esq.

Kate Willmore, Saint Cloud, Minnesota, divorce, custody and family attorney brings over 25 years experience to every client's legal matter. *** Licensed in Minnesota and in California

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