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How Is Debt Divided In An Illinois Divorce?

Debt Division

Like most other jurisdictions, in terms of divorce property settlements, Illinois is an equitable division state. The marital estate, which includes both assets and debts, must be divided equitably. There is a very strong presumption that a 50-50 division is equitable. However, a 50-50 division is often impossible, especially when it comes to marital debt.

Most families have about $90,000 in debt. Secured debts, mostly a home mortgage obligation, make up the majority of this figure. If the husband and wife divorce and the wife stays in the family home with the children, the husband would most likely not agree to pay half the mortgage, and a judge would probably not force him to do so.

Some creative approaches are available that partially address this issue. Nevertheless, the fundamental problem remains, especially since distinguishing between marital and nonmarital debt is not always easy. More on these things are below.

Because of all these complexities, only a Naperville debt division attorney can adequately protect your legal and financial rights in these situations. Strong representation from the start is critical in these cases. If the divorce property division is too one-sided, especially in terms of debt payment, it’s almost impossible to reopen a closed case. In other words, you typically only have one chance to protect your financial future, at least in this area.

Planning Mechanisms

Many times, a stitch in time saves nine. Some pre-divorce planning, as well as some pre-marriage financial planning, make the debt division process much easier.

Divorce and Bankruptcy

A Naperville debt division attorney can balance debt, assets, and FSOs (Family Support Obligations) in such a way that the divorce is not an unfair financial burden on one party. Alternatively, an attorney could file bankruptcy.

Chapter 7 bankruptcy eliminates most unsecured debts, such as credit cards and medical bills. If these obligations cease to exist, there is no reason to go through the time-consuming classification and division process. Moreover, bankruptcy stops creditor harassment. That includes advanced creditor adverse actions, like repossession and foreclosure.

Bankruptcy has intangible benefits in this area as well. Bankruptcy offers a fresh financial start to go with divorce’s fresh emotional start. Additionally, recovering from bankruptcy is not as difficult as some people think. It’s certainly a big, black mark on a credit report, at least for a few years. But it’s also a fresh start, and what happens next is up to you.

A pre-divorce bankruptcy is certainly not for everyone. But in light of the aforementioned benefits of bankruptcy, it’s at least worth considering.

Prenuptial Agreements

This next pre-divorce debt division tool is almost as unexpected as a bankruptcy. It’s almost as effective as well.

Until recently, pre-marriage property agreements were almost unheard of. But a few years ago, Illinois lawmakers adopted the Uniform Premarital Agreement Act. The UPAA streamlined laws and procedures in this area. So, in as little as one office visit, a Naperville debt division attorney can set up a solid premarital agreement. These agreements are also easier to legally execute.

This political change also unlocked some other benefits, mostly in the area of marital strength. It is hard to believe that a prenup could make a marriage stronger. But it’s true. Arguments about money are the leading cause of marital strife. Removing money from the equation, at least, for the most part, eliminates any chance that these disagreements could poison a relationship.

In terms of unsecured debt, premarital agreements usually include provisions regarding management and payment. For example, if a Husband and a Wife obtain a Visa card, a prenup could limit the card’s use (e.g. no single charges over $1,000) and also dictate how the bills are paid. Moreover, most prenuptial agreements include an overall unsecured debt split, such as 50-50 or 60-40, in the event of divorce.

Prenups have other uses as well. They classify assets in advance and avoid commingling problems. Additionally, prenuptial agreements usually address inheritance and succession matters. These issues are particularly important if either spouse has children from a previous marriage. Usually, divorce is like death for inheritance purposes. Marriage dissolution often cuts off all these rights for children, Frequently, that’s not the intended result in these situations.

To make their wishes crystal clear in these areas, many spouses draw up wills, trusts, and other executory instruments that complement the relevant provisions in the prenuptial agreement.

The UPAA not only made the drafting and execution processes easier. It also made the enforcement process easier. Usually, there are only two ways to successfully challenge a prenuptial agreement:

  • Unconscionable: We mentioned uneven debt division above. Uneven asset division is a possibility as well. The court only overturns such provisions if they are unconscionable. “I get all the assets and you get all the debts” is probably an unconscionable division. Additionally, the agreement must have been unconscionable when it was made. Stocks are often an issue in this area. Shares in a business could be almost worthless one day and almost invaluable the next day.
  • Involuntary: Mere pressure to sign does not render a prenuptial agreement involuntary. A sign-or-else ultimatum does not have this effect either, at least in most cases. Instead, involuntariness usually relates to the contents of the agreement as opposed to the signature line. These agreements are usually involuntary if one party withheld important information. The challenging party must prove that the information was unavailable elsewhere in these cases.

The bottom line on enforceability is that if each spouse had an independent Naperville debt division lawyer during the entire process, it’s almost impossible to overturn a prenuptial agreement in an UPAA state.

Post-Divorce Distribution

Pre-planning is not an option in all situations. It’s possible for a Naperville debt division attorney to start from scratch. This approach simply makes a divorce more time-consuming.

Classifying Debt

The aforementioned equitable division rule only applies to marital debt. Nonmarital debt is solely the responsibility of the spouse who incurred it, at least in most cases.

Illinois’ general rule in these situations is quite straightforward. All debts incurred before the marriage are nonmarital. All debts incurred during the marriage are marital, even if they are only in one spouse’s name.

However, the details are often complex. Assume a Husband, like most people, uses money from his paycheck to retire his $20,000 student loan debt, which he incurred before the marriage. The debt is clearly nonmarital. But the money from his paycheck is a marital asset since he earned the money during the marriage. If the Husband and the Wife divorce, the marital estate might be entitled to reimbursement. In practical terms, if the division is 50-50, the Husband might owe the Wife an additional $10,000.

It’s easy to see why these matters are so time-consuming. A Naperville debt division lawyer might need to go through years of statements for every debt the couple paid, whether it appeared to be marital or nonmarital.

Dividing Debt

If a premarital agreement does not establish the unsecured debt split, and this debt must be divided because no one filed bankruptcy, it must be divided consistently with the factors listed in Illinois law. These factors include:

  • Length of the marriage.
  • Future earning capacity of each spouse.
  • Property received in the divorce.
  • Spousal support payment or receipt.
  • Noneconomic contributions to the marriage.
  • Custody of minor children.

Secured debt is often more difficult to divide. In these situations, a Naperville debt division attorney often arranges an offset.

Here’s a typical scenario. A Wife is a stay-at-home mom whom the judge appoints as residential custodian of minor children. The best interests of the children, which usually override everything else, usually dictate that the children remain in the family home.

Since the Wife currently has no income, she couldn’t possibly make a $2,000 monthly mortgage payment on her own.

So, the lawyers might arrange for the Husband to pay $2,000 a month in temporary support for six months, so the Wife can find a job. If she is unable to do so, she could always ask for an extension. However, she would have to explain her failure to get a job to a judge. That could be an uncomfortable conversation.

Many times, the parties are able to work out such settlements on their own. Informal settlement negotiations usually begin before a divorce is filed and continue as the case progresses.

If these informal settlement negotiations stall or break down, most Cook County judges refer the cases to mediation. Basically, mediation is a court-supervised settlement negotiation session. An independent mediator, who is usually an unaffiliated Naperville debt division attorney, serves as the judge’s representative at these sessions.

Essentially, the mediator’s job is to ensure that both sides negotiate in good faith. Instead of simply going through the motions, they must both want to settle their disputes. Additionally, they must be willing to make some compromises, if that’s what it takes to reach an agreement. A “take it or leave it” offer and a “we’ll see you in court” counteroffer are not good-faith negotiation positions.

Mediated settlements are usually best for the parties in marriage dissolution matters. They reduce legal fees and give the spouses more control over the outcome. Mediated settlements are also typically best for children as well. Emotional courtroom showdowns often leave lasting emotional wounds.

Connect With A Hard-Working DuPage County Lawyer

A divorce property division is usually either the easiest or most difficult portion of a marriage dissolution matter. For a free consultation with an experienced Naperville debt division attorney, contact Keller Legal Services by calling 630-505-1515. Convenient payment plans are available.