Divorce can be an emotionally and financially stressful experience. While many people focus on dividing assets, understanding how debt is split is just as important. In Colorado, marital debt is typically divided equitably—but that doesn’t always mean equally. Here’s what you need to know about how debt is handled in a Colorado divorce and ways to protect yourself.
Marital vs. Separate Debt
Before debt can be divided, it must be classified as either marital or separate debt:
- Marital Debt – Debt incurred during the marriage, regardless of whose name is on the account. This can include mortgages, car loans, credit card balances, and personal loans (C.R.S. § 14-10-113).
- Separate Debt – Debt that one spouse took on before the marriage or after the date of separation. This typically remains the responsibility of the spouse who incurred it.
Even if a debt is in one spouse’s name, if it was used for marital expenses (such as household bills, vacations, or joint purchases), it is generally considered marital debt.
How Debt is Divided in a Colorado Divorce
Colorado follows the principle of equitable distribution, meaning debt is divided fairly, though not always equally. Courts consider several factors when allocating debt, including:
- Each spouse’s income and financial situation
- Who benefited from the debt
- Who is responsible for the associated asset (e.g., if one spouse keeps the house, they may take on the mortgage)
- Any history of reckless spending or financial misconduct
For more details on equitable distribution, see Colorado Revised Statutes § 14-10-113.
Protecting Yourself from Debt Liability
Even after a divorce, creditors may still hold you responsible for debt in your name. Here’s how you can protect yourself:
- Pay Off Joint Debts Before Divorce – If possible, close joint accounts and pay off shared debts before finalizing the divorce.
- Refinance or Transfer Debt – Ensure that any debt assigned to your spouse is transferred into their name alone. For example, if they are responsible for a car loan, they should refinance it solely in their name.
- Monitor Your Credit – Keep an eye on your credit report to ensure your ex-spouse is making payments on debts they were assigned. If they default, creditors may come after you.
- Include Clear Debt Terms in the Divorce Decree – Work with an attorney to draft a settlement that explicitly outlines who is responsible for each debt.
- Consider Indemnification Clauses – Some divorce agreements include clauses that require one spouse to reimburse the other if they fail to pay a designated debt.
What If Your Ex-Spouse Doesn’t Pay?
Even if a divorce decree assigns a debt to your ex-spouse, creditors may still come after you if your name is on the loan or account. This can damage your credit and lead to collection actions against you. If your ex-spouse stops making payments:
- Request Legal Enforcement – You may need to return to court to enforce the divorce decree and hold your ex-spouse accountable.
- Negotiate with Creditors – Some creditors may be willing to work with you on repayment terms or remove your name from the debt if you can show the court order assigning responsibility to your ex-spouse.
- Consider Legal Remedies – If your ex-spouse’s nonpayment causes you financial harm, you may have grounds for legal action, such as contempt of court proceedings.
Help with Debt after Divorce
Dividing debt in a divorce can be just as complicated as splitting assets. Without careful planning, you could end up responsible for debts you didn’t expect. Protecting yourself by closing joint accounts, refinancing debts, and clearly outlining terms in the divorce decree can help safeguard your financial future.
If you are facing a divorce in Colorado and need legal guidance on handling debt division, contact Boal Law for experienced representation and strategic advice.