How is Debt Divided in an Arizona Divorce?

How is Debt Divided in an Arizona Divorce?Just as spouses divide their marital property when they are divorcing, they also need to split any debt that they incurred during their marriage. In general, the court divides the marital debt equally between the spouses, but there are many exceptions. How do Arizona courts divide the spouses’ debt during divorce? Here is an overview.

Defining Marital Debt

Marital debt is any debt that either one of the spouses incurred during the marriage. It doesn’t matter if only one person’s name is attached to the debt; under Arizona community property law, that debt belongs to the marriage (community) and will be eligible for division. For example, if one spouse took out a personal loan while married, that debt will count as communal debt, to be divided during divorce.

Any type of debt can become marital debt if it meets this criterion. This may include:

  • Personal loans
  • Credit cards
  • Mortgage loans
  • Auto loans
  • Student loans
  • Tax debt
  • Payday or installment loans
  • Miscellaneous loans.

On the other hand, if a spouse incurred debt before getting married, that debt will remain their own separate debt and will not be divided during divorce. For instance, if one spouse opened a credit card account prior to the wedding date, that spouse will remain the sole debtor, and the other spouse will not share the responsibility.

There are specific exceptions to these general rules. For example, debt resulting from property destruction or a criminal judgment might not count as marital property, even if the debtor incurred it during the marriage. Speak to a knowledgeable divorce attorney to get a case-specific assessment of your situation.

Distinguishing Marital Debt from Individual Debt

The court will need documentation and other proof to establish which debt is shared and which is separate. The court may look at:

  • Credit bureaus
  • Tax returns
  • Bank account records
  • Credit card statements
  • Mortgage papers
  • Titles and deeds of ownership 
  • Business records.

If the spouses cannot provide sufficient documentation, they may enlist professionals such as Certified Public Accountants (CPAs) or forensic account specialists to investigate their finances.

Division of Debt During Divorce

Ideally, the spouses in a divorce case can come to an agreement regarding their debt division without going into a contentious trial. To create a debt division agreement, each spouse will need a lawyer on their side to negotiate with the other camp on the distribution of debts.

If the spouses cannot agree on debt division, the court will have to decide. In most Arizona divorce cases, marital debt is divided equally between the two parties because the law presumes that any debt incurred during the marriage was for the benefit of the marriage.

However, this is not a hard-and-fast rule. The judge still has discretion to distribute the debt in another ratio such as 60-40 or 70-30. This could happen in specific scenarios – for instance, if one spouse incurred a loan so massive that it would be grossly unfair to the other spouse to be burdened equally.

In addition, the application of community property law ends on the date that the divorce papers are served to the respondent spouse. This means that any debt incurred by either spouse after the date of service will no longer count as marital debt, even if they are still technically married. 

Call an Experienced Divorce Lawyer in Arizona 

Protecting your finances during property and debt division is crucial because the outcome can impact your financial situation for years after your divorce. Get the services of a top-rated divorce attorney from Goldman Law. We are experienced in the delicate legal issues surrounding divorce in Arizona and have helped our clients obtain favorable outcomes after marriage dissolution.

Talk to us about your situation. Call (602) 698-5520 or use our contact form for a consultation.