Georgia is an equitable distribution state, meaning generally that all debt acquired by either spouse during the marriage is defined as marital debt and is to be divided fairly. There is no “his” or “her” debt acquired in a marriage. The debt is marital debt even if the debt is only in the name of one spouse. For example, if the husband has a Home Depot credit card in his name and runs up a debt of several thousand dollars, it is a marital debt, meaning the wife is liable for that debt too. The court or jury, however, will decide what portion of that debt, if any, the wife is liable for. In an uncontested divorce the spouses can agree on how their debts will be divided.
Mortgages and Auto Loans
Home mortgages and auto loans are secured loans and are treated differently from unsecured loans, such as credit card debt. In the case of home mortgages, spouses generally have two choices: one spouse can refinance the mortgage and buy the other spouse out (usually paying the other spouse half the equity), or the home can be sold and the net proceeds divided between the spouses. Auto loans are similar: the spouse keeping the vehicle can refinance the lien in his or her name, thus freeing the other spouse from that debt. However, this is not always a viable solution if, for example, the spouse keeping the vehicle does not qualify for a car loan. In this case the parties can agree that the spouse keeping the vehicle will pay the monthly lien and all other expenses of owning a vehicle and hold the other spouse harmless and indemnify him or her from any debt or claims related to the vehicle.
Spouses dividing debt in a divorce action should bear in mind that creditors, such as banks and auto financing institutions, are not a party to their divorce and they continue to have the right to collect on theirs debts regardless of what the spouses agree to in their divorce settlement agreement. Therefore, mortgages and auto loans in both spouses’ names survive as debts by the individual parties even after the divorce. A useful tip: never sign a Quit-Claim Deed or sign over title to a vehicle without taking care of the debt associated with the home or vehicle first.