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The Division of Debts and Assets after a Divorce

In the United States, there are two basic legal approaches for the distribution of property after a divorce: equitable distribution and community property laws. Currently, 11 states have laws granting spouses community property rights—Alaska, California, Arizona, Wisconsin, Washington, Texas, Nevada, New Mexico, Louisiana and Puerto Rico.

Equitable Distribution

In states granting equitable distribution, courts attempt to divide all marital property equitably (or fairly). An equitable distribution does not necessarily mean an equal distribution, though. The court will typically look at a wide range of factors in determining how much marital debt and property each party should receive, including:

  • the age, health and station in life of the parties
  • the earning capacity of both parties
  • the length of the marriage
  • the job/occupation of each party
  • each party’s vocational skills
  • each party’s prospective employability
  • the contribution of each party to the marital estate
  • whether either party engaged in conduct injurious to the marriage

Community Property
Property Distribution
In community property states, assets and debts are typically identified as separate property and as community property. Separate property includes all property owned prior to marriage, and can include inheritances or personal gifts. Any other property obtained during the course of the marriage is community property. Upon dissolution of the marriage, all separate property belongs to the party who brought it into the marriage. All community property is customarily divided equally between the parties. If there are assets that cannot be divided equally—land, keepsakes, etc.—the court may sell those assets and divide the proceeds, or may develop a plan that gives both parties an equal amount of cash and assets combined.

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