Understanding Marital Debt Division in Indiana Divorce Proceedings

Most couples think about what marital property is owned and how it should be divided during a divorce, oftentimes before, but may neglect to consider marital debt division in the divorce proceedings. So when collecting or copying financial statements, titles, deeds, and insurance policies, do not forget to copy the bills, mortgages, personal and student loan statements, or any other evidence of debt as well. Whose name is on the debt or asset is irrelevant. This blog discusses why and how understanding marital debt division in Indiana divorce proceedings can help you protect your property and your rights. 

There are two statutes governing the disposition of property in a divorce, the first describes what property is subject to division by the court (I.C. 31-15-7-4(a)). The statute states that all property of the parties, whether owned by one party prior to the marriage, acquired by a party during the marriage in his or her own right, or acquired during the marriage by the couple’s joint efforts, shall be divided in a just and reasonable manner. The second statute, presumption for equal division of marital property (I.C. 31-15-7-5), provides that the court shall presume an equal division of the property is just and reasonable. It also enumerates factors that a court will consider if a party wishes to rebut this presumption. These factors include the contribution of each spouse in acquiring the property, whether or not the contribution was income producing, if the property was acquired by inheritance or owned before the marriage, the earning ability of each party, the economic circumstances of the parties at the time of the property division order, and any dissipation of the assets by either party. So what does this have to do with division of marital debt? Well, Indiana divides debts and assets together, under the same statutes. 

You may have heard that Indiana is a “one-pot theory” state. This means that any debt or asset of either party to a marriage, regardless of when it was acquired, is considered a part of the “pot” that will be divided in a divorce. Contrary to popular belief however, the court does not divide marital debts and assets one item at a time. It starts with a list of all debts and the amount owed, and all property, including real and personal property, banking, retirement, investment, and other financial accounts, and the value of each item of property. Both parties may submit their own list and indicate for individual items which party they want to have it. A total of all debts and all assets should be included on the list, as well as the total of the debts and of the assets assigned to each party. The court will then divide the assets based on the parties’ lists, all appraisals that have been submitted, and any arguments made that an equal division would not be just and reasonable. 

Indiana courts may divide marital property by (I.C. 31-15-7-4(b)): “(1) division of the property in kind; (2) setting the property or parts of the property over to one (1) of the spouses and requiring either spouse to pay an amount, either in gross or in installments, that is just and proper; (3) ordering the sale of the property under such conditions as the court prescribes and dividing the proceeds of the sale; or (4) ordering the distribution of benefits described in IC 31-9-2-98(b)(2) or IC 31-9-2-98(b)(3) that are payable after the dissolution of marriage, by setting aside to either of the parties a percentage of those payments either by assignment or in kind at the time of receipt.”. Benefits referenced in number four above include retirement and pension benefits. 

Parties can avoid the possibility of an adverse outcome when the court divides the marital debt and assets by reaching an agreement on property division (I.C. 31-15-2-17(a)(2), even if an agreement on other issues cannot be reached. The agreement should be submitted to the court in writing and signed by both parties to be incorporated and merged into the final decree of dissolution. Once a part of the decree, an agreement for disposition of property cannot be modified by the court, unless it specifically allows the court to do so, or the parties later agree to a court modification (I.C. 31-15-2-17(c)). 

This blog was written by attorneys at Ciyou & Associates, P.C. It is for general educational purposes. The blog is not intended to be relied upon for any legal matter or issue. The blog is not legal advice. This is an advertisement.


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