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3 solutions for debts in an Arizona divorce 

On Behalf of | Jan 27, 2025 | Division Of Assets

Thanks to the community property statute on the books, asset division in an Arizona divorce can be relatively simple. Spouses typically have to divide their property evenly. Any income earned during the marriage and any assets acquired with that income are subject to division under community property statutes. 

Couples may have to refinance their homes to divide home equity and come up with creative solutions for their resources. The community property statute also applies to financial obligations. Credit card debts, payday loans and other financial responsibilities can have a profound impact on the overall outcome of an Arizona divorce. 

What are some of the solutions for addressing marital debt during property division negotiations? 

1. Excluding debts from the marital estate

As with marital property, the timing of acquisition is often the key consideration during property division matters related to debts. Even accounts held in the name of one spouse are typically subject to division during divorce if the debt originated during the marriage. However, there are some exceptions to those rules. 

The spouses may have had a written agreement where they took personal responsibility for their own financial choices. The debt may technically constitute dissipation, meaning that one spouse wastefully spent money to diminish the marital estate. It could have been a hidden debt, possibly related to an affair. In certain cases, spouses can exclude specific debts from the marital estate and don’t have to share responsibility for them. 

2. Repaying the debts during divorce

One of the best strategies for addressing marital debt is to use assets from the marital estate to pay those debts in full. The strategy may diminish the financial resources that the spouses retain after divorce. 

However, they can move forward with their lives without ongoing financial responsibility stemming from the failed marriage. Many couples agree to cash out home equity or empty a savings account to pay off debts as part of a divorce. 

3. Splitting debts between the spouses

The spouses can agree to divide the debts that they owe. They might each assume responsibility for half of the balance owed on each individual debt. They could also potentially agree to each pay specific accounts. Typically, each spouse needs to have roughly the same amount of debt or the spouses must use the debt to balance the property in a way that results in an even split. 

Reviewing the marital estate carefully can help people establish viable strategies for property division matters. Finding fair solutions for shared debts can be as important as addressing high-value marital property in an upcoming divorce.