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How Does a Court Divide Assets and Debts in a Divorce?

Step 1: Identification

The first step is to figure out what the assets and debts are and their values. This may be harder than it sounds. The discovery process (Interrogatories and Depositions) as well as subpoenas can aid this process. Many times, appraisals of real property, jewelry, and/or businesses will be necessary. Items that will need to be identified include: vehicles, bank accounts, investment and retirement accounts, stocks and bonds, credit cards, loans, real property, business interests, personal property, and others.

Step 2: Classification of Assets and Debts

Once the assets are identified, the parties and/or the Judge must determine whether they are marital or separate. Separate assets are not subject to division by the divorce court and will remain with the spouse who owns them. Separate property includes gifts, inheritances and personal injury awards for pain and suffering or future lost wages. Martial property is property acquired during the marriage and may include income from or accrued value of separate property if substantial contribution is proven.

Step 3: Distribution of Assets

Courts must divide assets and debts based on “equitable distribution”- what is fair and reasonable after examining a list of factors. Those factors include: the length of the marriage; age, health, earning capacity and skills of each party; contributions by the parties; ability to earn money and pay debts; contribution to assets and to the marriage; each party’s separate property value; economic circumstances of each party; tax consequences; social security or disability benefits and any other factors deemed relevant by the Court.

Step 4: Distribution of Debts

The Court will look at several factors when deciding how to distribute debt. Those include the debt’s purpose, who incurred the debt, who benefitted from the debt and which party is able to repay the debt. Many times the Court will award a debt attached to an asset to the person receiving the asset. That can sometimes mean that a refinance is required to remove the other spouse’s name from that liability.

There is a lot at stake with a divorce, don’t make the mistake of trying to handle it on your own. Contact a Knoxville divorce lawyer at Easter & DeVore, Attorneys at Law, to discuss your situation and your options.

Knoxville Family Law Attorney