Divorce When There’s Nothing but Debt

Posted on Jan 13, 2023 by Katie Carter

The worst cases are the ones where there’s really nothing to divide but debt. It’s not that it’s hard; in fact, it’s no harder to divide debt than it is to divide most other assets (and it’s easier than some, like 401(k)s). It’s mostly that, at the end of the day, absolutely no one is happy.

No one wants to feel like they got ‘taken to the cleaners’ by their partner’s attorney, but that’s not the only reason that a person could walk away with almost nothing from their marriage. In fact, being in debt is a much more common reason that someone would walk away with almost nothing and, because of the nature of debt – meaning, that you have to pay it back – a person who divorces with a bunch of debt can often find themselves impoverished for many years into the future, too.

After all, divorce isn’t a money making proposition. We only have what existed during the marriage to divide; there’s no magic voodoo we can do to make that somehow turn into more money than you had before the divorce process began.

So, when you divide only debt – or predominantly debt – no one feels good about it at the end of the day. It makes negotiations more difficult, because the stakes are high – and because there’s no outcome that really puts anyone in a position that they can live the life they envisioned.

How is debt divided in divorce?

Like marital assets, debt is categorized as either separate, marital, or hybrid, and divided. It’s not necessarily divided 50/50, because under equitable distribution, the court can order something other than 50/50 depending on the negative and positive monetary and non monetary contributions of each party to the marriage, but 50/50 is still a pretty strong probability.

Even if you earn less than 50% of the income, you’re likely to come out with close to 50% of the debt. After all, you got 50% of the assets, even though you didn’t earn 50% of the income. Right? And, at any rate, you’ll have access to 50% of the assets to limit or mitigate the impact of 50% of the debt. Maybe it’s not enough – but, hey, that’s the situation that existed during the marriage. It’s not like you’re just getting stuck with the crappy end of the stick now. It was always crappy.

It’s only ‘separate’ – as in, belonging solely to one party or the other – if it was incurred before marriage, or after the date of separation.

But what if he was using the money for something bad?

Technically, we really only look to when the debt was incurred. During the marriage? It’s marital.

But, because under equitable distribution we can consider the negative and positive monetary and non monetary contributions of each party to the family, we can look at where the debt actually comes from. The law assumes that it’s marital, but you could either (1) make an argument to a judge to argue that certain debt should be classified as separate, or (2) reach an agreement where one party takes on more of the debt than the other.

So, what kind of debt would the court consider as ‘bad’ and be more likely to attribute to one party or the other?

Debt that was incurred for a ‘marital purpose’ is going to be found to be marital. A lot of things that look pretty one-sided, though, can still be for a legitimate marital purpose. It’s not like just because something he bought was for just him means that it’s not a legitimate expense. In that sense, I think we’re going to have to probably look at each questionable expense individually.

There are a couple good examples, though – like if he’s spending a ton of money to support a drug or alcohol addiction, or if he’s wining and dining a mistress. In either of those cases, you’ll probably have a pretty easy time convincing a judge that these expenses should belong solely to your soon to be ex. Otherwise, though, we’ll have to look on a case by case basis to determine.

But he’s a spender and I’m a saver! I shouldn’t be saddled with his debt!

You know what they say – opposites attract. It doesn’t matter that he was the one spending and you were the one saving. As far as the law is concerned, you’re partners. You could try to make an argument, depending on the specific facts involved, but, in general, you’ll find that marital assets and liabilities are divided relatively equally between the two of you.

But I didn’t even know this debt existed!

That happens sometimes, unfortunately. But not knowing about it doesn’t mean that it’s not at least partially your responsibility.

After all, if there was a bank account you didn’t know about, you’d expect part of that, too, wouldn’t you? It’s essentially the same.

We have so much debt. We can’t afford an attorney.

Unfortunately, even though you have a ton of debt, that doesn’t mean that it’s smart to go without an attorney. After all, not taking more than your share is going to be really important to you long term, so you want to still make sure that someone is advocating for you, and you understand what the real extent of your responsibilities is.

In these cases, avoiding debt is as important as gaining assets. So, a mistake could still be really costly, even though it doesn’t translate into actual money in your pocket.

It’s not ideal, but it does sometimes happen. Don’t be embarrassed; after all, everyone comes into the divorce with a different set of circumstances. What matters now is finding an attorney with whom you can be honest, and coming up with a strategy to improve your circumstances moving forward.

For more information or to request a copy of our divorce book for Virginia women, give our office a call at 757-425-5200 or visit our website at hoflaw.com.