Personal Loans and Credit Cards: Dividing Marital Debt in a Divorce

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Updated on October 14, 2025.

Divorce is often a complex and emotional process, particularly when it comes to the equitable division of marital assets and liabilities. The common misconception is that if a personal loan or credit card debt is solely in one spouse’s name, the other spouse bears no responsibility. This is frequently not the case.

Drawing on my experience as a professor of bankruptcy law and attorney who has handled family law cases for over two decades, this post will clarify the principles courts use to divide debts like personal loans and credit cards in a divorce, focusing on the critical legal concept of “equitable distribution.”

Listen: The Professor’s Audio Briefing.

Key Principles of Debt Division in Divorce

• Marital vs. Non-Marital Debt: The primary legal distinction is whether the debt was incurred during the marriage (marital debt) or before it (non-marital debt/premarital debt).
• Joint Responsibility: In most jurisdictions, debts acquired during the marriage are considered joint liabilities, regardless of whose name appears on the loan document.
• Courts of Equity: Divorce courts operate as “courts of equity,” meaning their goal is a fair division, which is not always an equal division.

The Divorce Court’s View: You Can Be Responsible for Debt Not in Your Name

As someone who has consulted with thousands of clients facing divorce, including having developed and taught family law courses, I’ve observed that a majority of married couples incorrectly believe that “what’s in my name is mine, and what’s in yours is yours.” However, it’s not that simple when it comes to the legal concept of equitable distribution.

The General Rule: Any increase in debt (or assets) during the marriage is generally subject to division. This means the court looks past the title or the name on the account to determine when and why the debt was incurred.

Example: Division of a Credit Card Balance

• Before Marriage (Premarital Debt): A spouse enters the marriage with a $1,000 credit card balance. This $1,000 remains their non-marital debt.
• During Marriage (Marital Debt): At the time of divorce, the balance is now $10,000. The $9,000 increase is the marital portion of the debt.
• The Division: That marital debt is typically split, making each spouse responsible for the increased balance.

This formula applies to all debts accumulated for marital purposes, whether they are credit cards, personal loans, or loans against retirement accounts (like a 401(k) loan).

Equitable vs. Equal: The Fairness Doctrine

The reason courts look beyond whose name is on the debt or asset is to prevent unfairness, as illustrated by the common scenario of the stay-at-home parent:

How Bankruptcy Influences Divorce Settlements

Consider a scenario where one spouse is a stay-at-home parent, focusing on childcare, while the working spouse accumulates all the savings, investments, and debts (like credit card or personal loans) under their sole name.

If the court only looked at the name on the title, the stay-at-home parent would be left with no marital assets, and potentially even stuck with debts in their name, while the working spouse would take all the marital wealth.

This outcome is neither logical nor fair—it is not equitable.

Because courts are fundamentally courts of equity, they ensure that both spouses share fairly in the financial outcomes of the marriage. Equity dictates that the value accumulated (both positive and negative) through the joint efforts of the marriage must be divided fairly.

Personal Loans in Divorce

Personal loans, like all other types of debt, could be considered marital debt. However, the purpose of the personal loan may not always be clear. So courts may have to focus on what the loan was used for.

Marital Purpose (Typically Divisible): Loans used for joint expenses such as home repairs, family vacations, or consolidating shared credit card debt are generally considered marital obligations and debt and should be divided accordingly.

Non-Marital Purpose (Potentially Non-Divisible): Debts arising from financial misconduct, such as gambling, may be classified as separate liabilities in divorce proceedings.

One common defense against responsibility for debts that appear marital is the claim of marital asset dissipation, which occurs when one spouse unilaterally increases marital debt through reckless spending or self-serving financial behavior.

Ultimately, whether a personal loan qualifies as marital debt depends on its intended use and the financial context of the parties. Courts rarely exclude debts incurred during the marriage from the marital estate entirely, but they do scrutinize the underlying purpose.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.

Updates:

• January 11, 2025.