What is considered ‘martial debt’ in Colorado?
Generally, all debt that a party incurs before the marriage is considered separate debt,
and all debt incurred after the marriage is considered marital debt. However, there are
many exceptions – for example, usually student loans accumulated during the marriage will
continue to be the sole responsibility of the individual who obtained the education, but not always.
How does the Court divide marital debt if we don’t agree?
As for marital debt, the court will divide it up on an ‘equitable’ basis – that is, what is fair
under the circumstances, and not necessarily equally. This may mean a 50/50 distribution, or often, in some other proportion. Much of the determination of how much each party must pay revolves around what specifically the debt was incurred for, who incurred the debt, and who it
benefitted the most. Generally, if a party is awarded an asset, that party is responsible
for the debt that goes with it.
It is all Marital Debt until the Divorce Decree?
Colorado is different from most states in terms of how debts are treated after the divorce
action is filed. Most states provide that marital debt does not accumulate after the
divorce has been filed. Colorado, however, provides that all debt accumulated until the
Decree of Dissolution enters (which typically happens at the end of the case) is still
marital debt, even if the parties have physically separated. Additionally, because
Colorado is a no-fault divorce state, the Court will not allocate debt based on marital
misconduct of either of the parties. However, economic fault may be considered in
dividing up debt. For example, if while the divorce is pending, one of the parties has run
up credit card bills without the permission of the other party, the court could potentially allocate 100% of that debt to the party that incurred the debt. However, if the case is not clear cut, the
court can still decline such treatment and order that each party is responsible for half of
the debt (this may be the case if the debt was used for reasonable family support &
Once a divorce action is filed, a mandatory “temporary injunction” is put into place. This
states that neither party may dispose of, encumber, or transfer marital assets without
permission from the other party or court order. In other words, neither party should use
marital funds for anything other than reasonable living expenses.
While the divorce is pending, there may be disagreement as to who pays what debts. If
the parties cannot agree, they can request a temporary orders hearing where the Judge
will decide who pays for what debts while the case is pending.
Who Is Responsible?
Often times it is either impracticable or impossible to liquidate all the marital assets in
order to pay off debt. Thus, when deciding which party to allocate marital debt to, the
court will consider each party’s financial situation, in an attempt to allocate the unpaid
debt in a manner such that each person can move towards financial independence from
the other. Frequently this means that the higher earning spouse will get more of the
debt, but in turn the chances of alimony or spousal support being paid to the other
spouse will decrease. Also, the court will take into account who is the recipient of any
assets secured by a loan (for example, a residence with a mortgage).
Coming to an Agreement
When possible, the parties are encouraged to agree upon allocation of the debt, as there
are a number of protective provisions that can be incorporated whereas if the parties had
gone to hearing, the court does not have jurisdiction to enter the same relief. For
example, a divorcing couple has a joint Visa credit card debt. The parties agree that the
husband is responsible for the Visa credit card. Generally, credit card companies will not
remove the other spouse’s name from the liability until it has been paid off in full. If the
husband defaults on the credit card, the creditors can still come after the wife for
payment of the balance, regardless of what the divorce paperwork states.
However, you can protect yourself by ensuring that there is indemnification language in
any separation agreement that allows you to request reimbursement from the party
who is to pay his or her share of the debt.