Division of Debt in a Colorado Divorce

Summary:  In general, debt is divided equitably, which is usually about 50 - 50. Consider options such as bankruptcy or the sale of assets such as real estate in order to pay off debt. Debt is often one of the major reasons for divorce. Plan to eliminate or reduce it before the decree is final. Otherwise you may be too late.

Marital Debt Must Be Allocated

Debt, such as credit card bills and medical bills, is divided between the spouses similar to property division. The division should be equitable (fair.)

Generally in Colorado this means a 50 - 50 division.

However, the circumstances of both spouses must be examined. In many cases, a large amount of debt is a major reason for a divorce.

When the spouses separate and move to two separate households, their monthly expenses for housing approximately double. And if they are co-parenting minor children, they cannot rent a one bedroom apartment. Thus, a separation means a large increase in monthly expenses.

Sometimes, the expenses more than double, because additional health insurance must be purchased where one employer will no longer insure an x-spouse. Also, sometimes additional day care expenses are incurred after a separation because of the need for both spouses to work more hours.

In other words, debt must be reduced or eliminated in order for the parties to survive after a separation.

Either assets must be sold to raise cash to pay debt or bankruptcy must be used to discharge debt.

For many, bankruptcy may be the only alternative. However, in 2005 the law changed such that bankruptcy cannot be used to discharge marital debt which is allocated in a divorce proceeding. In other words, a bankruptcy discharge must be completed prior to a divorce decree. Otherwise, bankruptcy will not eliminate marital debt.