In Nebraska divorce, the judge divides debt between divorcing spouses as part of the overall division of the marital estate using a standard of equity and fairness. Nebraska law says that property division must be reasonable and equitable, considering five factors. Nebraska courts have interpreted this statute as requiring a division of the net marital estate, meaning that it includes a division of marital debt, as well.
Relevant factors in debt and property division
The factors listed in the statute to consider in dividing debt and property (and granting alimony) are:
- Circumstances of the parties
- Length of the marriage
- Each spouse’s contributions to the marriage, including to the education and care of the children
- Interrupted careers or education
- Ability of the spouse who may need support to work while not harming the interests of any children in the spouse’s custody
The division of debt and property is unique in each marriage according to the circumstances of the parties and marriage. The Nebraska Supreme Court has said that the division is “not subject to a precise mathematical formula, but the general rule is to award a spouse one-third to one-half of the marital estate.
Nuts and bolts of debt and property division
The court determines what assets and debts are marital and which are nonmarital, or separate. A nonmarital asset or debt one owned or incurred before marriage or received through inheritance or gift by only one spouse. A marital asset or debt is one received or incurred during marriage by the spouses jointly or by either alone, so long as the asset or debt is not nonmarital, also called separate.
The net marital estate is the total of marital property less marital debt. To distribute this equitable, the judge must assign debts and assets in an equitable manner between the parties.
As an alternative, the divorcing spouses might negotiate a settlement agreement that divides assets and debts, usually through their respective lawyers.
Considerations to make debt distribution more equitable
A recent article in Divorce Magazine raises important issues in debt division that anyone facing divorce should discuss as early as possible with an experienced family lawyer. While a divorce decree divides marital debt, even if a debt is assigned to one spouse, the debt may still legally be the responsibility of both jointly. Should the spouse assigned a debt default after the divorce, it is possible that the lender could seek collection from the other spouse, despite the divorce decree. The other spouse’s credit report could also be harmed.
The parties may be able to refinance a debt or use other assets or funds to pay it off in such a way that removes the legal liability of the spouse who will not have responsibility after the divorce. The spouse and their attorney should thoroughly analyze these legal issues to mitigate future financial harm.