Everything gets divided in divorce—including the debt. If you really think about it, it’s not all that surprising. If you get half the dishes and he takes half the dish towels, certainly at some point you’re going to start talking about that Sears card. Or the line of credit that helped you renovate your kitchen. Or the loans on the cars—that you refinanced to help pay for the downstairs guest bathroom remodel.
The average American carries a staggering amount of debt. From student loans to credit cards and car loans, there are a lot of different kinds of debt out there, and many of our clients seem to have touched on all of them at some point or another.
So, how does divorce handle debt? How are things divided? What’s marital, and how is it determined? Are there things that wouldn’t be divided? (Like, what happens if he spent a bunch of money wining and dining his mistress, or went out and bought a boat against after separation—against your express wishes?) Surely (right?) there are cases where it just isn’t “fair” to hold both parties responsible for the debt—especially when it was really only one party who racked it up.
How does divorce handle debt?
Just like assets, debts are divided in divorce. In fact, debts are really treated in much the same way as assets. Generally, we assume something fairly close to a 50/50 split. Of course, the law doesn’t say that things have to be split 50/50; under equitable distribution (our fancy way of describing how property is divided in Virginia) the judge or parties can agree to some other kind of distribution that isn’t even close to 50/50 (only that rarely—if ever—even happens). I’m just talking about realities: in most cases, the property (including debts) is divided fairly close to 50/50. The question is less whether it will be divided 50/50 (or something fairly close) than which 50% each party is entitled to.
Most of the time, specific debts are allocated to each party. Often, the higher earning spouse takes slightly more of the debt (on the assumption that, with his or her increased earning capacity, he or she is capable of paying more off); sometimes, taking on more of the debt can be negotiated in exchange for a greater share of the assets or paying less spousal support, for example.
In an uncontested divorce, where the terms are settled by a separation agreement, there’s a lot of flexibility in how everything is divided. The parties can feel free to craft a solution that works for them, rather than allowing a judge to decide (which is the way it’s done in contested cases). Don’t want the house? Give your husband your share of the equity in exchange for him taking on the same amount in additional credit card debt. Or vice versa. Or whatever. There’s a way to negotiate around to a result that works for everybody in an uncontested divorce. In a contested divorce, on the other hand, the judge is more likely to go ahead and split things right down the middle.
How are things divided?
In divorce, like we’ve already sort of touched on, things are divided according to equitable distribution. But how the debt is classified also matters.
Just like property, debt is classified before it is divided. Debt, again, like property, can be classified as separate or marital.
Let’s start with the easiest: marital debt. Any debt that was incurred during the marriage is presumed to be marital. It’s safe to say that, in most cases, the debt on a jointly owned credit card is probably marital. It was taken on for the benefit of the family, for family related expenses. It’s marital, and is equally divided.
Debt that was taken on prior to the marriage, like property earned, purchased, or acquired during the marriage, is separate. It’s not divided during the divorce, and it goes with the person who brought it in. Most of the time, student loan debt is handled this way.
Of course, these classifications are assumptions based on the way things are normally handled in a marriage. Just because a debt was taken on during the marriage doesn’t necessarily mean that it’s going to be equally divided.
If a marital debt is contested by one of the parties, the judge (or the attorneys, if the divorce is being negotiated) will look at what the money was spent on. If we’re talking about wining and dining a mistress, chances are probably pretty good that we can get the debt allocated to the party responsible for it.
I had a case once where one of the issues was a Best Buy credit card, which was used by the husband to buy a computer (an iMac, if it matters) for the wife for Christmas. Wife said that it wasn’t HER debt because it was a gift from him, but, unfortunately, that’s really not the way it works. It was marital debt (because it was taken on during the marriage for the sake of the family), and the judge equally divided it.
Pre and post separation debt
Pre and post separation debt is a little different, too. Again, pre separation debt is just marital debt—which is divided more or less equally (unless we reach some sort of different agreement). Post separation debt, on the other hand, can be looked at differently, especially if one party has really gone overboard in terms of his (or her) expenses.
I worked on a case once where, after separation, wife used husband’s credit card to go out and buy an iPad, iPod, and MacBook Air. She was counting on it being divided in half as marital debt, but the court awarded it all to her. Even though post separation, you’re still married (because you’re married until you’re divorced), it’s not handled the same way as marital debt. Otherwise, lots of people would go out post separation and buy entirely new wardrobes, boats, or cars. Most of the time, people are stuck with whatever debt they ring up post divorce—because the theory there is that you’re responsible for your own spending, and can no longer attribute it to the marriage.
What kinds of debt might not be divided in the divorce?
If you can prove that the debt wasn’t related to an expense for the sake of the family, you may be able to successfully argue that one of you take it all, or a specific portion.
They key is to look at the source of the debt. If it’s for the family, you may have to divide it. If not, it’s possible you could argue that the party responsible for the debt take it all on.
Likewise, if you’re worried about your husband wasting assets post separation, you can ask (in your pendente lite hearing) that an order be entered prohibiting the wasting of assets. Courts do this kind of thing all the time, and then you’re protected in the event he decides to go out and buy a new boat, thinking that you’ll get half the debt associated with it.
For more information about marital debt, how it’s divided, or to schedule a confidential appointment with one of our licensed and experienced Virginia divorce attorneys, give our office a call at (757) 425-5200.