After the market crashed in 2008, we handled a lot of cases where there was more debt than anything else. It was terrible. Houses were underwater, and I’ve never seen such high credit card debt.
In fact, at that point, it seemed like a lot of people decided to stay together because they really couldn’t even afford to divorce. As the market has picked back up, so too have the number of divorces. I mean, I get it. If you’re going to lose too much, it’s just not worth it.
I had a client who recently said to me that she just didn’t want to be left eating cat food at the end of all of it. She was laughing when she said it, but I think the sentiment is one that a lot of people can relate to. Before you know exactly how it’s all going to pan out financially, it’s easy to be scared of divorce.
There’s a lot of variables involved, and, when there’s also a lot of debt, it can feel pretty overwhelming. I don’t know if it makes you feel any better, but I see a lot of cases where there is literally a ton of debt. It’s not that surprising, so don’t feel bad. The better thing to do is to come up with a plan for how to divide it.
I paid off his credit cards, but I still have debt in my name! What happens?
Well, the first thing to know is that debt is divided like the other property of the marriage. First, it is classified, and then divided. There are three main classifications for property (and debt) in Virginia.
Separate property
Separate property is anything earned, purchased, or acquired PRIOR to the marriage. (There’s also a separate classification for gifts from someone other than your spouse, inheritances, personal injury settlements, etc – but that wouldn’t apply in the case of divorce, so I don’t plan to discuss it here.)
Any debt that you had prior to the marriage is probably going to be your separate debt. If you had a credit card, for example – that’s yours still, except to the extent that you continued to make charges on an account for a marital purpose. (More on this in a minute.)
Typically, student loans are separate, too. Even if you incurred some of them during the marriage, the only part that would be divisible is a portion incurred for living expenses that the two of you benefited from DURING THE MARRIAGE. If you’re struggling to pay your student loans (hey, I feel you, sister), or suspect that you will after divorce, it might be a good idea to talk to a financial advisor and look into alternate payment plans – income based, deferred, etc – while you get back on your feet.
Marital Property
Marital property is anything earned, purchased, or acquired DURING the marriage – regardless of title.
That whole “regardless of title” thing is important. It doesn’t matter whether the debt is in your name or his. It doesn’t matter whether you focused on paying off one loan or one person’s debts before the other’s – it’s marital because it was incurred for a marital purpose.
So, what’s a marital purpose? Something that a regular family would spend money on to keep afloat. So, car loans. Credit cards, where you’ve charged things like medical bills, groceries, new tires, shoes for the kids, etc. It’s not classified as NOT marital just because the purchase benefitted only one party. It might be normal in your day-to-day for your husband to, say, go to a bar on a Friday night, or for you to purchase clothes or makeup.
What typically ISN’T for a marital purpose are two things: waste, and adultery.
Waste
I can see two ways that a person’s spending could really pose a problem, and potentially alter the way debt would be allocated in a divorce.
If a person has a habit – say, a drug, alcohol, or gambling habit – or a hobby that has become obsessive – say, cars – and they’ve liquidated marital assets or done some crazy stuff to be able to maintain their habit, that’s a problem.
If someone buys something big – say a motorcycle or a boat – because of the impending separation, that’s also a problem. That’s not to say that any purchase of a motorcycle or a boat (or something that seems designated for only one party or the other) is necessarily a problem. It’s not. People buy boats all the time, and that doesn’t mean that one party is wasting assets. But it could, especially if it happens right after a discussion about separation.
In these types of cases, it may be reasonable to argue that one party should take on a disproportionate award of the debt.
Adultery
Waste can also happen in the form of a new relationship. Say that your husband is spending a lot of money on his mistress. There are charges for hotel rooms, weekend getaways, expensive restaurants, etc – well, that could be a problem.
We look at the source of the debt, and divide it accordingly. If the debt is associated with his new lady love, it can be good evidence of the adultery (though keep in mind, dinners out are not proof that they’ve actually had sex!) and it can also lead to a different division of the debt.
Hybrid Property
Property can also be part marital and part separate. Take the example of the credit card I used earlier. You had some debt prior to marriage, but after marriage you used your same credit card and charged marital things to it.
The debt may be part marital and part separate, but we’d have to look at it to know for sure. It’s possible you could’ve paid off the old debt and what remains is marital, or whatever – but we’d have to look fairly carefully to see.
How do I make sure that he takes his portion of the debt?
Keep in mind, too, that there’s a difference between what we can negotiate and what we could get in court. We can negotiate anything – so long as he agrees. If he doesn’t agree to take on a greater allocation of the debt, then the only choice we have is to either compromise or to litigate. I’m talking here about points we could use to support our argument if we went to court, but there’s never any guarantees. It’s a good idea to talk to an attorney to come up with a comprehensive plan that takes your goals for the divorce into account, and also discussed the possible advantages and disadvantages of such a course of action.
We’re attorneys, not magicians, so we don’t have a crystal ball. Ultimately, choices for how to proceed will be left up to you –but I encourage you to ask probing questions about the cost involved if you pursue a specific course of action versus another. Of course, it’s probably not worth spending an extra $20k on your divorce to avoid $10k in debt. But that’s a more personalized conversation that would be more appropriate in a consultation one-on-one with an attorney.
It’s good that you’re thinking about these things, and it’s even better if you start to take steps to plan for the future you want. Sit down and talk with an attorney, with a full and complete picture of your debts and assets, so that you can come up with a comprehensive plan to get back on your feet as quickly as possible post divorce. For more information or to schedule an appointment with one of our attorneys, give our office a call at 757-425-5200.