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Kane County Debt Division in Divorce Lawyer

Kane County Debt Division Divorce Lawyers

Divorce Attorneys Serving St. Charles and Geneva Explain How Loans and Mortgages Are Handled in Divorce

When divorcing spouses think about the division of their property, it is only natural to focus first on your assets. However, many couples also have a significant amount of debt such as a home mortgage, car loans, student loans, and outstanding credit card balances.

At Weiler & Lengle P.C., we appreciate how overwhelming it can be to completely reorganize your finances as a result of a divorce. You can no longer rely on your spouse's support and have to figure out everything for yourself. Your income may drop as you spend time dealing with the divorce, and at the same time, you face added expenses related to moving, replacing household items, separating your insurance and cell phone plans, and so on.

As experienced divorce attorneys, we will look out for your best interests in the allocation of assets and debts, including any tax consequences.

Illinois Law Governing Division of Marital and Non-Marital Debts

Under Illinois law 750 ILCS 5/502(a), divorcing spouses are encouraged to develop their own plan for the division of their debts and assets. The court will generally approve whatever agreement you present at your final court hearing, known as the prove-up hearing.

If you and your spouse cannot reach an agreement on your own, the judge assigned to your case will step in. Illinois law 750 ILCS 5/503 defines rules for the court to follow. The same general rules for differentiating marital versus non-marital assets also apply to debts.

Non-marital debt is assigned to its owner-spouse. Debts that you incurred before your marriage generally remain your own personal debt, not marital debt. For example, if you bought a car prior to your marriage and are still paying off the loan, or if you had student loans prior to your marriage that you are still paying off, those debts would be considered non-marital and assigned to you. Per Illinois law 750 ILCS 65/5, you are not liable for debts incurred by your spouse prior to your marriage.

Marital debt is divided between the spouses in just proportions considering all relevant factors.

Debts that primarily benefit one spouse. Most debts incurred during your marriage are considered marital debt, even if the debt primarily benefited one spouse. For example, debt incurred for the wife's education or to buy a car for the husband are generally considered marital debt. Similarly, large outstanding medical bills for one spouse are generally a marital debt. In determining who assumes responsibility for these debts in a divorce settlement, the question of "who benefited?" is just one factor among many that will be considered. In some cases, a greater portion of the marital debt may be offset by a greater portion of the assets.

However, if one spouse takes out a loan under their name alone, the other spouse may not be liable for that debt, per Illinois law 750 ILCS 65/5, known as the Illinois Rights of Married Persons Act, aka the Family Expense Act.

Mortgage loans. If you have a mortgage on your marital home, it was probably approved in both your names. If you want to keep the home, your lender will generally require you to apply for a new loan in your name only and your spouse will expect payment for their share of the equity in the home. Alternatively, you could agree to sell the home and split the profits. While it is possible to keep the current loan intact and include a clause in your divorce settlement stating that you will make the payments, this is risky for your spouse because they are still legally liable for the payments and their credit score will be damaged if you fail to make payments. Additionally, the outstanding mortgage amount will limit their available credit to purchase or lease another home or apartment.

Business loans. Any loans taken out to support an individual or family business will generally be taken into account in the business valuation and handled as part of the disposition of the business.

Auto loans and leases. Most couples have at least two cars and two car loans or leases. As with a mortgage, if a car loan is in both your names, you will generally want to refinance the loan in just one name. Typically, whoever takes a given car also assumes the associated debt.

Credit card debt. Multiple factors may be considered in dividing credit card debt, including:

  • Whether an account was opened in your name only prior to your marriage.
  • Whether an account opened during your marriage was in your name alone or jointly in both your name and your spouse's.
  • Whether the debt was incurred for your primary benefit or for the benefit of the family. Per Illinois law 750 ILCS 65/15(a)(1), expenses of the family-e.g., food, home furnishings and repairs, children's needs, and family vacations-are the responsibility of both spouses individually and jointly.

St. Charles Debt Division in Divorce Lawyers

If you are carrying significant debts at the time of your divorce, your property settlement will need to carefully balance the distribution of debts with assets, spousal maintenance, and child support payments. The divorce attorneys of Weiler & Lengle P.C. have the financial savvy to ensure that your financial best interests are protected no matter how complex your marital estate may be. Contact us at 630-382-8050. We serve clients in St. Charles, Geneva, and neighboring communities in Kane County.

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