Other than issues involving children, the most complicated aspect of divorce in Michigan is the division of property and debts between the divorcing spouses. When it comes to figuring out who gets what and who will pay which bills, even couples who agree on everything else can suddenly find themselves at odds.

Divorce is least expensive when the divorcing couple can agree on how to divide property and share the debt load. But when this isn’t possible, the court must step in and determine how to split things up. Let’s take a look at the factors courts must consider in splitting up property and debt responsibilities.

Fair vs. Equal

Under Michigan law, courts must split marital assets and debts “fairly”. But this doesn’t necessarily mean “equally”. For example, it wouldn’t be fair for one spouse to take half the marital debt if that spouse doesn’t have a source of income to pay that debt. It also might not be fair to simply sell the family house and split the proceeds, if this means the children and the custodial parent would likely have to move into a smaller house than they’re accustomed to. Factors that can influence what a judge determines is fair include:

• How long the couple was married
• Contributions to the marital estate by each spouse
• Life status of each spouse
• Where the property came from or where money for the property came from
• How the debt originated (i.e. was it incurred for benefit of the family, like purchase of a family car, or as a result of one spouse’s actions, like a gambling debt or buying gifts for a secret lover)
• Age and health of each spouse
• Needs and circumstances of each spouse
• Income and earning ability of each spouse
• Conduct of each spouse, including instances of infidelity or domestic violence
• General principles of fairness

Separate Property/Debt vs. Marital Property/Debt

Typically, only marital property and debt are divided in a divorce, and any property or debt deemed separate (belonging to only one spouse) remains with that spouse. Two significant exceptions to this rule, though, are when the other spouse has contributed to the asset or when the marital estate is insufficient for the suitable support and maintenance of the other spouse.  In most cases, any property or debt belonging to a spouse before the marriage is considered separate property or debt. Gifts given to one spouse or debts incurred solely for the benefit of one spouse are also generally considered separate. Any income, assets, increased value of assets or debts incurred during the marriage are usually considered part of the marital estate and must be divided.

When separate property becomes marital property
While the rules above for separate and marital are generally true, the waters get muddied when separate property gets used for family purposes. For example, money inherited by one spouse is separate property unless it gets put in a joint account or used for something like fixing up the family home. Then, a court may rule that the inheritance has been “commingled” and has become part of the marital estate.  Also, a house owned by one spouse before that marriage is considered separate property, but any increase in value of the house due to appreciation, renovations or additions may be considered marital property.

The Tricky Part About Dividing Debts

Although a judge can assign responsibility for a debt to one spouse or another, that assignment does not affect the creditor in any way, and the creditor will continue to hold the original debt holder responsible for the debt. For example, if the wife gets the family car so she can transport the kids and also gets responsibility for the car loan, but the loan is in the husband’s name, the bank who made the loan will continue to hold the husband responsible. If the wife fails to make payments on the loan, the delinquency will appear on the husband’s credit report and the bank will demand payment from him. Likewise, if the husband takes responsibility for the wife’s credit card debt because she has less income to pay the debt, the credit card company will still hold the wife responsible and will pursue her assets to pay the debt if the husband fails to make payments.  

One solution for this dilemma is for each spouse to take out a loan to pay off their share of the debt, so the debt gets transferred to their name. However, this is often not a possibility because, without the income of the other spouse, one or both spouses may not qualify for a loan. Without a refinancing option, each spouse will be forced to get the court involved to enforce payment of debt responsibilities if a problem arises.

Ease Property and Debt Division with Help from an Experienced Attorney

Obviously, there are many complicated aspects to dividing property and debts in a Michigan divorce. Whether you’re looking to settle division of property and debts outside of court or anticipate having to let a judge make the decisions at a trial, an experienced family law and divorce attorney can be of great value. An attorney can negotiate with your spouse’s attorney without involving the strong emotions that lead to bad decisions or argue your case in court with reasoning the judge will find convincing. A good attorney will ensure that you know and understand your rights with respect to your property and debts and will help you to reach a favorable outcome, whether through negotiation or at trial.

With 34 years of experience, Michigan family law and divorce attorney Carlo J. Martina and his team can answer your questions about division of property and debt in a divorce and represent you in both settlement negotiations and in court.

Call Detroit divorce lawyer Carlo J. Martina today at (734) 254-1140 to schedule a consultation.