A secured liability can be appropriated to settle a current debt (for real property and other assets) if payments on the debt are delinquent. For this reason, secured liabilities possess fundamental properties that need to be considered during divorce.
Secured Liabilities Are Connected to a Particular Asset
Typically a liability is secured with a particular asset. For instance, a home’s mortgage (the secured liability) is secured with the home and the real estate it sits on (the asset).
Liabilities and Assets Should Stay Together
When the marital estate is being divided, an asset and its specific debt should remain together. For example, one party should not receive the car while the other assumes the vehicle’s debt. The simple explanation for this rule is summed up in one word: control. Divorce should eliminate, as much as possible, the control that either party holds over the other. If an asset is separated from its debt, the party holding the debt is in a position to exert control over the party holding the asset.
The following example illustrates this condition: Suppose the husband takes over the debt on the wife’s vehicle after their divorce. One day, the husband observes the wife’s car being driven by her new boyfriend, and he tells her that if the boyfriend continues to drive her car, he will quit making car payments. The husband has exerted inappropriate control in this situation due to the division of asset and liability in the marital estate.