“Marital property” that is subject to be divided between two spouses in a divorce pursuant to the Illinois Marriage and Dissolution of Marriage Act has a broad definition, and in addition to all of the property and assets two parties own, that definition includes debts and other obligations. The parties’ marital debts and obligations will have to be equitably apportioned, which does not necessarily mean a 50/50 split, upon the dissolution of marriage, regardless of whether the debt is jointly titled or individually titled.

If the debt or obligation was incurred prior to the marriage, it is likely that debt will be allocated to the party responsible for incurring the debt. Typically, student loans also stay with the spouse whose education was funded with the loans.

When deciding how to apportion debts that were incurred during the marriage, courts typically assess the overall financial distribution of the marital estate; whichever party has the greater ability to pay; whether the debt is associated to a piece of property (usually, debts incurred to purchase property are assigned to the spouse who is awarded the specific piece of property, i.e. the loan on a vehicle); whether both parties had knowledge and approved of the undertaking of the debt; and any other relevant factors.

The debt incurred while a divorce is pending is presumed to be marital as well. However, one spouse cannot just go rack up thousands of dollars of debt and expect a court to order the other spouse to contribute to the debt if the debt is outside the scope of general living expenses that are expected to be incurred. In any event, parties should regularly check their credit reports to monitor whether lines of credit are being opened in their names. The three credit bureaus, Experian, TransUnion, and Equifax provide one free report each year; the reports can be requested and generated online at https://www.annualcreditreport.com/requestReport/landingPage.action. Additional information regarding monitoring one’s credit can be found on the USA.gov website, https://www.usa.gov/credit-reports.

Not only will monitoring credit reports protect one’s financial stability and alert a party of any fraudulent activity, but it will also keep parties aware of whether or not his/her spouse is running up debt prior to and during the divorce process. Adequate knowledge of the marital debts and obligations is necessary in order for parties to knowingly enter into settlement agreements. Although there are terms and provisions that can be included in agreements to combat the hidden or concealed debt that pops up five years after a divorce, the negative effects it can have on a person’s credit during the process of trying to ensure that the appropriate person is held responsible are sometimes irreparable.

Another issue that might not be the first thing a person thinks about when getting a divorce is the rewards and perks associated with the marital credit cards, including frequent flier miles. Parties should be aware that these benefits are considered assets that are also subject to distribution upon divorce. However, since these rewards are not likely to be transferrable by the credit card companies, values should be assigned to the rewards and the remaining property distribution offset by other assets or property. Although this may seem like a minor issue to be disregarded, significant rewards can be accumulated over the course of a marriage, and the value should be considered in the overall allocation of marital assets and debts.

The impact of credit card debt and the perks associated with credit cards could be substantial depending on the facts. Parties need to have an understanding of their complete financial situation prior to and throughout the divorce process.

by Brandy Wisher