A sour economy has changed the focus in a divorce from dividing up a couple’s assets to parceling out debts, attorneys say.
The shift from assets to debt was gradual, but it’s been the standard since 2009, attorney Greg Leopard said.
While many couples ignore their financial future when they get married, it’s an overlooked component at the end of marriages, too, Leopard said.
Newlyweds trust that “ ‘our love will get us through it,’ but there are no cute sayings with divorce,” Leopard said.
While the debt held by the average American household is dropping year after year, the Federal Reserve’s most recent Survey of Consumer Finances shows that the median American family’s net worth dropped 38 percent from $126,400 in 2007 to $77,300 in 2010.
Attorney Willie Saunders said the size of the debt in Augusta varies. Negotiations typically take place when student loans, mortgages, car loans and credit card debts balloon past $15,000. A deciding factor is often who stands the most to lose if the debt goes to collections and a person’s credit rating is affected. In a military town, that’s especially important because security clearances hinge on clean finances, Saunders said.
Some states apply a “community property” principle to divorce, meaning assets and debt are generally split 50/50. But both Georgia and South Carolina are “equitable distribution” states, meaning it’s ultimately up to a judge to decide on a fair distribution.
If a divorce is uncontested, both parties work out an agreeable solution and the judge usually approves it.
If neither side can agree, then “it’s up to a judge to make those hard decisions and he has a lot of latitude on how to divide debts,” attorney Richard Goolsby Jr. said.
Sometimes a divorce isn’t even financially feasible because of debt. That’s especially the case when a split family is paying the mortgage on a house or the rent on an apartment and other new living expenses. For some families, the right choice is to examine the options presented by bankruptcy before committing to a divorce, Goolsby said.
Divorce is frequently an emotional tinderbox, but cooler heads seem to prevail when the issue is debt and not assets.
“People tend to be more cooperative,” Leopard said. “There’s a realization that both sides have to work together.”