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What Happens to Debt in a Divorce in North Carolina?
If you’re facing a divorce in North Carolina, understanding debt division in divorce is crucial. Divorce and debt are both difficult topics. Often, these are topics that many people don’t want to confront – yet, sometimes, they’re unavoidable. This is particularly true in the case of divorce.
Financially, most marriages go through highs and lows. There may be times when you’re in the black, and times when you’re in the red. For most couples, there is often hope that debt can be reduced or eliminated as the situation improves. However, when a couple decides to divorce, that can change.
Just as a couple must divide assets during the divorce, so must they also divide debt. Understandably, this leads to the question – how do you do that? What does North Carolina say about debt, and particularly about dividing debt during the divorce? Let’s take a closer look at the law together.
How Debt Division Works in a North Carolina Divorce
Understanding Equitable Distribution in North Carolina
In order to understand what might happen to the debt in the event of a divorce, it is helpful to know a little about the property division process in North Carolina during a divorce. Different states have different rules and philosophies about property division, and North Carolina courts follow what is known as an “equitable distribution” process.
Equitable distribution means that a court will seek to do what is most fair in a particular case, considering all the circumstances involved. It is important to realize that this does not necessarily mean that a court will always make a 50-50 complete even split of property in every case. In fact, it means that a court will consider the totality of the circumstances and the particular situation of the couple involved and will decide what is fair on that basis.
Types of Property and Debt (Separate, Marital, Divisible)
Separate Property is property that one spouse either had before the marriage or obtained during the marriage through inheritance or gift, and which belongs only to that spouse.
- Importantly, for property to retain its character as separate property, it must not be commingled with other assets. For example, if a wife receives an inheritance and then deposits that inheritance into a joint bank account used regularly by both she and her husband, then the character of the property will likely change from separate property to marital property. In other cases, one spouse might receive an inheritance and use it to buy a marital home, which the couple lives in for many years, and to which both parties make improvements and contribute to the mortgage payment. In that case, the inheritance, which was initially considered separate property, will be considered marital property in the event of a divorce. For these reasons, if one spouse wishes to truly ensure that separate property remains separate, it is wise to keep those assets in a separate account, or if it is real property, to maintain a deed only in the name of the spouse who owns the property. Doing so will avoid confusion about the character of the property in the future.
Marital Property is, as it sounds, property obtained during the marriage and belongs jointly to both husband and wife.
- It can include all kinds of property, such as bank accounts, investment and retirement accounts, real property, and personal property. As a general rule, in the event of a divorce, marital property is subject to the laws of equitable distribution, and a court will attempt to divide the property among the parties as fairly as possible.
Divisible Property is property that has changed in value some time after the parties separated, but before the divorce became final.
- There are a variety of these circumstances. It could include increases in retirement or investment accounts, or an increase in the value of real property, or a variety of other assets.
Understandably, it may seem confusing to try to categorize all of the different types of property. This is why it is wise to thoroughly consult with an attorney regarding your particular situation and how the law may apply to your circumstances.
How Marital Debt Relates to Property Division Laws
Now that you understand how North Carolina divides property in a divorce, it is important to know that these laws pertain to assets and debt. As a result, just as a court will attempt to divide assets between the parties equitably, it will also attempt to do so with debt.
Understandably, the thought of a court making these important decisions may seem stressful and overwhelming, as the matter is ultimately out of your hands. If you find yourself feeling this way, there is good news. Increasingly today, more than ever, many couples choose to resolve their property-related issues, almost entirely outside a courtroom.
Options for Dividing Debt Outside of the Courtroom During Divorce
Mediation and Collaborative Law for Debt Division
There are many options for resolving divorce-related issues outside of a courtroom. Common alternative dispute resolution methods include mediation, lawyer-led settlement negotiations, and collaborative law, to name a few. While these methods may vary somewhat in their procedure, they all have the same common goal. Ultimately, the goal of all alternative dispute resolution is to reach an agreement on the issues that matter most to a couple without involving a court. Doing so reduces time and stress and gives couples the freedom and flexibility to truly find the best solutions for their particular issues.
Negotiating a Fair Debt Settlement
Certainly, property division is one matter that is commonly just addressed outside of court. The benefit of doing this is that the parties can choose to divide their assets and debts in whatever way they wish. When negotiating how to divide property, a couple is not required to make a 50-50 split if they do not want to do so. In fact, many couples choose not to do so and prefer to negotiate and reach resolutions on property division that fit within the framework of the other issues they must address.
The options available to those who choose to address their issues outside of court are almost limitless, as long as the agreement remains within the bounds of the law. Often, the particular circumstances involved in a divorce will directly affect property division. Negotiating all of the issues and fitting them together in a framework that works best for both parties is ultimately the goal.
As parties work together to communicate, cooperate, and draft an agreement, it is important to remember that at times, issues can become complicated. This can be particularly true if a couple has a significant amount of property, assets, and debts included, to be divided. Certainly, neither spouse wants to feel as if they didn’t fully protect their rights or receive a fair settlement. That’s understandable. It’s also why you should seek guidance from an attorney who knows and understands the law and can give you advice specific to your particular situation.
The Law Office of Dustin McCrary – Here For You Each Step of the Way
At The Law Office of Dustin McCrary, we know that you have so many questions when you find yourself at the beginning of the divorce process. After all, this is often one of the biggest life changes most people encounter. Feeling a little intimidated and worrying about the journey ahead is understandable. The good news is, you don’t have to go on this journey alone. Instead, you can reach out to us. We’ll meet you wherever you are in this process and help you decide how to move forward. On this journey, we’ll walk with you each step of the way. You may start in a difficult place, but there’s a brighter chapter ahead. We’re here to help you get there. If you’re ready to take the first step, reach out to us today. We look forward to meeting you soon.