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How Debt Is Treated When You Divorce

The division of property is a critical consideration when couples divorce. It signifies a culmination of each spouse’s contributions to a marriage and their financial security as they move into their separate futures. When weighing whether to divorce, many people think of property division in terms of what money and property they will walk away with when the dust settles. While this is important, it ignores another critical aspect of property division: settling a couple’s debt.

Community Property Encompasses Debt

Nevada is a community property state. So when couples divorce, it is presumed that each spouse is given an equal legal right to income and property attained during the course of their marriage. In contrast, it is also presumed that all property that was brought into a marriage by a spouse—and even gifts and inheritance received by an individual spouse during a marriage—is treated as the “separate property” and remains in the sole possession of the spouse when the marriage ends.

Generally speaking, like with property, debt is categorized by the date it was acquired. For debt acquired during the course of a marriage, courts presume this is community debt, which is equally split between the spouses. In contrast, any debt that a spouse had entering the marriage remains that spouse’s sole responsibility. Courts cannot order the other spouse to pay that debt using separate property or assign that debt when dividing community property. And as an exception to the general rule, debt obtained during a marriage that was secured by a spouse using that spouse’s separate property may be considered separate debt. There is also something called the “intent of the lender” test, which is used by courts to determine whether or not credit acquired during marriage is a community or separate debt.

This makes the classification of debt a critical issue when addressing community property. Experienced family lawyers are therefore thorough in obtaining credit reports, and carefully analyzing all records of debts in order to best advocate for their client’s community property rights. While debt is the last thing a person wants to think about when ending their marriage, it is so important for your financial future to get it right.

Family Law Attorneys at Viloria, Oliphant, Oster & Aman L.L.P.

Viloria, Oliphant, Oster & Aman, L.L.P. is a full service law firm that offers a wide array of legal services to individuals, including family law representation. If you or your spouse has decided to end your marriage, a family lawyer can guide you through the complex and intricate process of dividing your property and debt. These are important issues that impact your financial future. Let us help you. Call Viloria, Oliphant, Oster & Aman L.L.P. today at (775) 227-2280 to schedule a consultation or contact our office through our website

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