Nebraska Divorce: What Happens to My Debts When We Split?

Divorce is a complex journey, and while many people focus on dividing assets, the division of debts can be just as, if not more, challenging and impactful. In Nebraska, navigating the landscape of debt division requires a clear understanding of the law, a proactive approach, and often, the guidance of an experienced legal professional. This article aims to shed light on how debts are handled in a Nebraska divorce, providing practical advice, illustrative examples, and crucial considerations to help you prepare for this significant aspect of your marital dissolution.

Nebraska's Approach: Equitable Division, Not Necessarily Equal

First and foremost, it's vital to understand Nebraska's core principle for dividing marital property and debt: equitable division. This means the court will divide debts in a manner that is fair and just, considering all relevant circumstances, but not necessarily an exact 50/50 split. This differs significantly from "community property" states, where assets and debts acquired during marriage are typically divided equally.

In Nebraska, equitable division applies to both assets and debts accumulated during the marriage. The court's goal is to ensure that both parties leave the marriage on as stable a financial footing as possible, given the circumstances.

Marital Debt vs. Separate Debt: A Key Distinction

Before any division can occur, it's crucial to distinguish between marital debt and separate debt. This is often the first point of contention in a divorce.

What is Marital Debt?

Marital debt generally refers to any debt incurred by either spouse (or jointly) from the date of marriage until the date of separation or the date of the divorce decree, provided it was for a marital purpose or benefited the marriage. It doesn't matter whose name is on the loan; if it was incurred during the marriage for the benefit of the family, it's typically considered marital debt.

Here are common examples of what Nebraska courts usually consider marital debt:

• 🏠 Mortgages and Home Equity Loans: Debts secured by the marital home, regardless of whose name is on the deed or loan, are almost always marital.
• 🚗 Vehicle Loans: Loans for cars, trucks, or other vehicles purchased and used by the family during the marriage.
• 💳 Credit Card Debt: Balances on joint credit cards or individual credit cards used for household expenses, family vacations, children's needs, or other marital purposes.
• 🏥 Medical Bills: Debts incurred for healthcare services for either spouse or their children during the marriage.
• 🎓 Student Loans: While often considered separate debt, a student loan incurred by one spouse during the marriage could be deemed marital if it significantly benefited the marriage (e.g., one spouse obtained a degree that led to a substantial increase in family income).
• 💼 Business Debts: Debts incurred for a business that was considered a marital asset or contributed to the marital income.

What is Separate Debt?

Separate debt, conversely, refers to debts that one spouse incurred before the marriage or after the date of separation, or debts incurred during the marriage solely for non-marital purposes (e.g., gambling, an affair, or personal expenses that provided no benefit to the marriage). Even if a debt was incurred during the marriage, if it was for a frivolous purpose or to dissipate marital assets, a court may assign it solely to the spouse who incurred it.

Examples of separate debt often include:

• 💍 Pre-Marital Debts: Debts one spouse brought into the marriage, such as student loans, credit card balances, or car loans existing before the wedding day.
• 💔 Post-Separation Debts: Debts incurred by one spouse after the couple formally separated, provided they were not for essential marital needs (e.g., maintaining the marital home before its sale).
• 🎲 Frivolous or Dissipative Debts: Debts incurred by one spouse for purposes that did not benefit the marriage, such as gambling debts, significant spending on an extramarital affair, or reckless investments.

The Nuance: The line between marital and separate debt can sometimes be blurry. For instance, if one spouse used a pre-marital credit card to pay for marital expenses, that portion of the debt could be reclassified as marital. This is why thorough documentation and legal analysis are crucial.

Factors Nebraska Courts Consider When Dividing Debt

When spouses cannot agree on how to divide debts, a Nebraska court will intervene. The court will consider a range of factors to achieve an equitable division, as outlined in Nebraska Revised Statute 42-365 and common law. These factors often mirror those considered for asset division and include:

• ⏳ Duration of the Marriage: Longer marriages often lead to a more equal division of marital debts.
• 💰 Economic Circumstances of Each Spouse: The court will look at each spouse's current and future earning capacity, age, health, and ability to pay off debts. A spouse with significantly lower income or greater expenses might be assigned less debt.
• 🤝 Contributions to the Marriage: This includes not only financial contributions but also non-monetary contributions, such as caring for children, maintaining the household, or supporting a spouse's education or career.
• 📈 Circumstances Leading to the Debt: Was the debt incurred for a valid marital purpose? Was one spouse primarily responsible for reckless spending or dissipating assets? For example, if one spouse ran up significant credit card debt on lavish personal items without the other's knowledge or consent, the court might assign that debt solely to them.
• 🧑‍⚖️ Conduct of the Parties: While Nebraska is a "no-fault" divorce state, egregious financial misconduct (like hiding assets or incurring excessive debt fraudulently) can influence the debt division.
• ⚖️ Alimony/Spousal Support: The court may adjust debt division based on whether one spouse is paying or receiving alimony, as both impact post-divorce financial stability.
• 👧 Custody and Child Support: If one parent has primary custody and receives child support, their financial capacity to take on debt might be affected.

The Practicalities of Debt Division: What You Can Do

Navigating debt division effectively requires a strategic approach. Here are the practical steps and considerations:

1. Inventory and Document All Debts

The first crucial step is to create a comprehensive list of all debts, both joint and individual. For each debt, gather as much documentation as possible:

• 📝 Loan statements (mortgage, car, personal loans)
• 💳 Credit card statements (at least the last 12-24 months)
• 💲 Student loan statements
• 🏥 Medical bills
• 📄 Any other outstanding bills or agreements
• 📊 Credit reports from all three major bureaus (Equifax, Experian, TransUnion) – you are entitled to a free one annually from annualcreditreport.com.

This process will help you understand the full scope of your financial obligations and identify which debts are clearly marital and which might be considered separate.

2. Open Communication and Negotiation

The most efficient and cost-effective way to divide debts is through mutual agreement. This often happens during mediation or through direct negotiations between spouses and their attorneys.

When negotiating, consider:

• 🤝 Who incurred the debt?
• benefit Did it benefit the marriage?
• 💰 Who has the financial capacity to pay it?
• ⚖️ How can the debt division be balanced with asset division to achieve overall fairness?

3. Court Intervention: When Agreement Isn't Possible

If you and your spouse cannot reach an agreement, the court will make the final decision. This is typically a longer, more expensive, and less predictable process. The judge will carefully weigh all the factors mentioned above to determine an equitable distribution.

Common Types of Debt and Their Division Illustrated

Mortgage and Home Equity Loans

The marital home is often the largest asset and debt. Options for dividing the mortgage debt include:

• 🏠 Selling the Home: The most common solution. Proceeds (after sale costs and paying off the mortgage) are divided, or losses are shared.
• refinancing One Spouse Keeps and Refinances: One spouse buys out the other's equity and refinances the mortgage solely into their name, removing the other spouse from the loan obligation. This is the ideal scenario if one spouse wants to keep the home and can qualify for a new loan.
• ✍️ One Spouse Keeps, Other Remains on Loan (Risky): Sometimes, one spouse keeps the home and agrees to pay the mortgage, but the other spouse remains on the original loan. This is highly risky because if the paying spouse defaults, the other spouse's credit will be damaged, and they remain legally liable to the lender. Courts often prefer solutions that sever financial ties.

Example 1: Mortgage Debt and Refinancing

🏡 Sarah and Tom have a marital home with $200,000 left on the mortgage. The home is worth $300,000, so they have $100,000 in equity. Sarah wants to keep the home, and Tom agrees. As part of the divorce decree, Sarah is ordered to refinance the mortgage solely into her name and pay Tom $50,000 for his share of the equity. Tom is removed from the deed and the mortgage. This ensures Tom has no further liability for the home loan.

Credit Card Debt

Credit card debt can be particularly contentious. While a court order can assign responsibility for a joint credit card to one spouse, the creditor is not bound by that order. If the assigned spouse defaults, the other spouse can still be pursued by the creditor.

• 💳 Joint Accounts: Both spouses are typically liable to the creditor. The court will assign responsibility between the spouses.
• 💸 Individual Accounts: If an individual account was used for marital expenses, it can be considered marital debt. If it was used for frivolous or non-marital spending, it's more likely to be assigned solely to the individual who incurred it.

Example 2: Credit Card Debt and Frivolous Spending

🛒 Mark and Lisa have $30,000 in credit card debt. $20,000 is on a joint card used for household expenses and vacations. The remaining $10,000 is on an individual card in Mark's name, which he ran up on a gambling spree without Lisa's knowledge. A Nebraska court would likely deem the $20,000 joint card debt as marital and divide it equitably (perhaps assigning $15,000 to Mark and $5,000 to Lisa, or splitting based on their respective incomes). The $10,000 gambling debt, however, would almost certainly be assigned solely to Mark due to its non-marital, dissipative nature.

Student Loans

Student loans are often a gray area. Generally, a student loan incurred before marriage is separate debt. A loan incurred during marriage is often separate as well, especially if it's for a degree that primarily benefits only the borrower.

However, Nebraska courts may consider a student loan marital if:

• 🎓 It was incurred during the marriage.
• 📈 The education significantly increased the marital income or improved the family's standard of living.
• 👨‍👩‍👧‍👦 The other spouse contributed to the student's ability to study (e.g., worked to support the family while the other attended school).

Example 3: Marital Student Loan

📚 David enrolled in medical school during his marriage to Emily. Emily worked full-time to support their family and cover household expenses while David focused on his studies. David took out $150,000 in student loans during this period. Now, David is a successful doctor earning a high income. Even though the loans are solely in David's name, a Nebraska court might consider them marital debt because Emily contributed to David's ability to obtain the degree, and the degree significantly enhanced their marital lifestyle and future earning potential. The court could assign a portion of this debt to Emily, or more likely, balance it by assigning David a larger share of the debt while Emily receives a larger share of other assets or alimony.

Car Loans

Car loans are typically straightforward. The spouse who keeps the car is usually assigned the associated loan. If the car is sold, the loan is paid off from the sale proceeds.

What Happens to Your Credit Score?

This is a critical consideration. A divorce decree, while legally binding between you and your ex-spouse, does NOT automatically remove your name from joint accounts or change your legal obligation to creditors.

For example, if your divorce decree states your ex-spouse is responsible for the joint credit card, but they default on payments, the creditor can still pursue you for the debt, and the late payments will negatively impact your credit score. You would then have to sue your ex-spouse to enforce the divorce decree, which is another legal battle.

To protect your credit:

• 💳 Close Joint Accounts: If possible, pay off and close joint credit cards immediately.
• refinancing Refinance Loans: For mortgages or car loans, the spouse keeping the asset should refinance the loan solely into their name.
• ✍️ Indemnification Clauses: Your divorce decree should include an indemnification clause. This states that if your ex-spouse fails to pay a debt assigned to them, and you are forced to pay it, they must reimburse you. While this doesn't protect your credit, it gives you a legal avenue for recovery.
• monitoring Monitor Your Credit: Regularly check your credit report after divorce to ensure debts are being paid as per the decree and to catch any issues early.

Strategies for Managing Debt Division in Nebraska

• 🔍 Be Thorough and Transparent: Fully disclose all debts and provide documentation. Hiding debts can backfire severely in court.
• 🤝 Prioritize Agreement: Negotiating a debt division settlement is almost always preferable to litigation. It saves time, money, and emotional stress, and gives you more control over the outcome.
• ⚖️ Consider the Overall Picture: Debt division doesn't happen in a vacuum. It's part of the entire financial picture, including assets, income, and expenses. A fair debt division might mean an unequal asset division, or vice versa.
• 📊 Factor in Tax Implications: While less common with debt, some aspects of financial division can have tax consequences. Consult with a financial advisor or tax professional if needed.
• Bankruptcy Understand Bankruptcy's Role: If one or both spouses are considering bankruptcy, it can significantly impact debt division. Debts like child support and alimony are generally not dischargeable in bankruptcy. It's crucial to understand how bankruptcy might interact with your divorce proceedings.
• 🧑‍⚖️ Seek Legal Counsel Early: An experienced Nebraska family law attorney can help you:
  • identify ➡️ Identify and categorize marital vs. separate debt.
  • negotiate ➡️ Negotiate effectively with your spouse or their attorney.
  • protect ➡️ Protect your financial interests and credit score.
  • represent ➡️ Represent you in court if an agreement isn't possible.

Possible Compensations and Offsets

Sometimes, simply dividing debts isn't enough to achieve equitable results. Nebraska courts can use various methods to compensate one spouse or offset imbalances:

• assets Assigning More Assets: If one spouse takes on a significantly larger share of marital debt, the court might compensate them by awarding them a greater share of marital assets (e.g., more equity from the home, a larger share of retirement accounts).
• support Alimony Adjustments: The amount or duration of alimony (spousal support) might be adjusted to account for one spouse's disproportionate burden of debt or reduced ability to pay due to debt.

Example 4: Debt Offset with Asset Division

🏠 Sarah and Ben have $150,000 in marital equity in their home and $50,000 in joint marital credit card debt. Sarah wants to keep the home and has the income to pay the mortgage, but she also wants to take on all the credit card debt to simplify things. The court, aiming for an equitable division of their net marital estate ($150,000 - $50,000 = $100,000), might award Sarah the entire home equity ($150,000) and the entire credit card debt ($50,000), resulting in a net asset value of $100,000 for her. Ben, in this scenario, would receive no assets or debts, effectively getting his "share" through Sarah taking on the debt.

Important Notices

• 🚨 Creditors are Not Bound by Divorce Decrees: This cannot be stressed enough. Your divorce decree is a contract between you and your spouse. It does not alter your contract with the original lender. If your name is on the loan, you are still legally responsible to the lender, regardless of what the divorce decree says.
• 🧑‍💻 Impact on Future Borrowing: Significant debt assigned to you can impact your ability to get new loans, mortgages, or credit cards after the divorce.
• ⏰ Timeliness: Address debt division early in the divorce process. Procrastination can lead to greater complications and financial distress.

Debt division in a Nebraska divorce is rarely simple. It requires careful financial assessment, strategic negotiation, and a thorough understanding of state law. While it can be an emotionally charged process, making informed decisions about debt is crucial for your financial well-being post-divorce.

Don't try to navigate this complex terrain alone. The information provided here is for general educational purposes and does not constitute legal advice. Every divorce case is unique, and the best way to protect your rights and ensure a fair outcome is to consult with a qualified Nebraska family law attorney. They can provide personalized advice based on your specific circumstances, helping you understand your options and advocating for your best interests.

Disclaimer: This article provides general information about Nebraska family law and debt division in divorce. It is not intended as legal advice and should not be relied upon as such. The law is complex and constantly evolving. For advice on your specific situation, please consult with a qualified attorney licensed to practice in Nebraska.