Loan Repayment After a Divorce

Getting a divorce can be an emotionally and logistically challenging experience. You and your partner must make decisions about how your assets and debts are divided. If you or your partner took out any loans or accrued any debt during your marriage, you will need to discuss who is responsible for paying off that debt after your divorce. Contact the experienced Media, Pennsylvania divorce attorneys at our office.

Who Is Responsible For Repaying Loans After a Divorce?

There are many factors that go into determining who is responsible for repaying loans after a divorce, especially in an equitable distribution state like Pennsylvania. Among the factors to consider are who took out the loan, whether the loan was taken out before or after the couple was married, and whose name is written onto the loan agreements.

Equitable Distribution

Pennsylvania is an equitable distribution state (in contrast to a community property state), which means all assets and debts are distributed in a fair and equitable manner during a divorce proceeding. To determine what is fair and equitable, courts will typically look at which spouse benefitted from the loan and each spouse’s earning ability. For example, if one spouse is unemployed with little earning potential, and the other spouse has a full time job with a steady income, the court may assign the debt to the spouse with the greater earning potential in the interest of fairness.

When Debt Was Accumulated

Generally speaking, debt accumulated before marriage remains the debt of whichever spouse accumulated that debt, but debt accumulated after marriage is much trickier to divide. Again, courts in Pennsylvania will focus on what is most fair to both parties. Courts will not only look at monetary contributions invested into a loan but also non-monetary contributions. For example, if one spouse took out a student loan to attend law school after marriage, and the other spouse helped out with all the household chores, taking care of the kids at home, driving the student spouse to and from school, and delaying his or her own education so that the student spouse could go to school, the court may find that these non-monetary contributions were in fact contributions to the debt. In this case, a court may find in favor of the spouse who did not take out the loan since the spouse’s non-monetary contributions satisfied his duties toward the loan.

Divorce Agreement vs. Loan Agreement

Even if both spouses eventually come to an agreement about how to divide their debts after a divorce, and their agreement is written into their divorce agreement, their problems may not be solved just yet. The spouse whose name is written on the loan agreement must ensure that the other spouse is performing his or her end of the deal and making the agreed upon payments in a timely manner. Otherwise, the spouse who owns the loan may find a decline in his or her credit score as payments fail to be made on time.

Reach Out to an Attorney for Help Today

As you can see, there are many details and intricacies that go into a determination of how debt is divided in a divorce, and an experienced divorce attorney is your best chance at getting the relief you deserve. Contact us online or at 610-565-6100 to schedule a consultation with our Media, Pennsylvania legal team today and learn about your options and remedies.

Resource:

legis.state.pa.us/cfdocs/legis/LI/consCheck.cfm?txtType=HTM&ttl=23&div=0&chpt=35&sctn=2&subsctn=0