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Debt in divorce · Family Law Talk

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  Speaker 1: Welcome to Family Law Talk. Family Law Talk presented by
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  Kurt Stangy of Stangy Law Firm PC. Stangy Law Firm
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  is a multi state family law firm. Now here's your host,
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  Kirk Stangy.
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  Speaker 2: Welcome to Family Law Talk. We have an interesting topic today.
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  The topic is debt and divorce and this episode today
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  is based on an article on our blog on Stangy
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  Lawfirm dot com dated February fourth, twenty twenty five, and
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  the title of that article is is your former spouse's
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  debt Your responsibility? So it's a follow up to the
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  episode today. Going over to our blog and read this
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  article on the same topic for more information. But let's
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  go ahead and jump into the topic at hand. When
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  parties get married, they can come into it in different
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  financial states. Right. Some people come into marriage with a
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  lot of assets and not a lot of debt. Some
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  people come into a marriage and they've got a lot
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  of debt and they don't have a whole lot of assets.
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  And so when parties decide to get married, then there
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  can be a concern about the debt if one or
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  both parties are bringing debt into the marriage itself. And
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  then on the flip bend. At the conclusion of a divorce,
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  there can be a lot of negotiation, a lot of
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  rank or in terms of who's going to take the debt,
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  and is the debt marrial debt, is the debt separate debt,
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  and how does all of this work out? And obviously,
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  when we're talking about debt, there can be all kinds
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  of debt that individuals have coming into marriage or leaving
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  a marriage, from credit card debt, student loan debt, could
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  be medical debt, it could be simply the mortgage to
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  the house. It could be notes for vehicles that the
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  parties own, and there could be lots of other debt
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  that individuals have as well, from personal loans to business loans,
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  you name it. There are a lot of possibilities in
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  terms of debt, and debt issue can be a big,
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  big issue. Lots of individuals are just worried about what
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  assets they're going to get, but the question about debt
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  can be a big, big deal that lots of individuals
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  want to know a whole lot about when they're contemplating
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  getting married or getting divorced. So there are some situations
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  where debt is typically going to be marital debt. Okay,
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  so joint debts if you will. And typically what we're
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  talking about here is any debt that was accrued during
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  the marriage itself. And what a lot of parties miss
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  is they think that the name on the debt itself
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  is dispositive. So if husband has a credit card in
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  his name or wife has a credit card in her name,
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  then they oftentimes think, well, I'm not responsible for that debt.
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  That debt is in their name. But if two individuals
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  are married at the time that this debt is accrued,
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  then it is technically marital debt. And the same rules
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  apply to assets. So any assets individuals get daring marriage
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  is going to be marital property in an equitable division
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  state right, So again, the assets could be in the
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  name of husband, that could be in the name of wife,
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  so husband could buy a car, wife could buy a
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  car and not put the other spouse's name on it.
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  But if it's acquired during marriage, it is still a
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  marital asset. Likewise, any debts acquired during the marriage or
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  going to be marital debts. Now debts that individual brings
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  into the marriage, So if they had it before the
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  marriage itself, then that would be separate debt, and from
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  a technical legal standpoint, that should be debt that they
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  take with them in the instance of the divorce, if
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  they brought that debt into the marriage, But obviously tracing
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  that debt and figuring out when it was accrued can
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  be a big, big issue. So, yeah, you're getting married,
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  and maybe you're marrying somebody theoretically who's not good with money,
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  and they run up a whole lot of debt. That
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  can be a big problem for the other spouse. I mean,
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  even if the other spouse isn't somebody who runs up
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  a lot of debt, who isn't a big spender, if
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  their spouse is, that can create a big problem in
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  the instance that a divorce later takes place, and it's
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  definitely something somebody has to think long and hard about. Now.
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  One are the other questions that can come in the
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  text of divorces, Well, what occurs in an instance where
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  one party's engaging in wasteful dissipation or they're just spending
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  in a way that is just really irresponsible and they're
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  running up a bunch of debt. Maybe the other spouse
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  doesn't know anything about it, They didn't endorse this. The
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  other spouse you know, maybe they have a gambling problem,
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  maybe they have a drinking problem, maybe they just have
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  a problem in general with spending, and they spend lots
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  of money, and so the other spouse is often asking
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  if anything can be done in these kinds of instances,
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  and the answer to that question, maybe it is possible
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  in a divorce to argue that the other parties engaging
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  in wasteful behavior, wasteful dissipation, and so it is possible
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  to ask for that spouse to be responsible for that
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  debt if the other spouse had nothing to do with it.
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  But from a technical standpoint, it's still marital debt. It's
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  still a debt that was accrue during the marriage. So
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  the court has to resolve that issue. But it doesn't
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  necessarily mean that the court is going to divide that
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  debt in half and give each spouse half. It's possible
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  that one spouse could argue that this was wasteful, this
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  was their own behavior, trying to argue that they should
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  take on that debt, but it's not an absolute. Courts
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  don't always do that, and so it is a reality
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  that when two individuals get married, they become one person
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  or the eyes of the law, So if one party
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  is running up a bunch of debt, it could be
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  a problem for the other spouse. All right, So let's
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  go ahead and jump into some other questions individuals have
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  when we get into the topic of divorce, and one
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  of the big ones is this, which is are you
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  responsible for your partner's debt after a divorce? So, once
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  you get divorced, do you have any responsibility for the
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  debt that they accrue? And the technical answer to that
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  is normally no. In a divorce, the court's going to
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  divide the marital property and the debt, and this could
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  be by agreement in a settle case, or it could
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  be that the judge does it after a trial. And so,
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  from a technical standpoint, the debt that somebody accrues after
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  a divorce, at that point the marriage is dissolved and
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  they shouldn't be held responsible for it. But there are
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  some quirks, and there are some things parties need to
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  be very careful about. I mean, one of the big
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  ones I've seen is in the instance where the parties
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  owned a home and they had a mortgage and both
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  their names are on the mortgage, and then one of
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  the spouse is going to keep the home. The other
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  spouse is going to move out. And I've seen the
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  scenario nenumerous times where then parties do the divorce may
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  bee pro say by themselves, they don't hire warriors, and
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  so then there's no clause in the divorce settlement requiring
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  the party keeping the house to refinance it to remove
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  the other spouse's name off the house. And then years later,
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  let's say the spouse keeping the house stops paying the
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  mortgage and then there's a foreclosure action. Well, look, if
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  the other spouse's name who's not keeping the home isn't
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  removed off the mortgage, they're still on the hook. The
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  mortgage company isn't going to care that the parties are
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  divorced and that the one spouse is keeping the home.
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  If both parties name is on the mortgage, the mortgage
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  company is going to go after both the parties. Okay,
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  So what's really important is that if there's debt at
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  the time of the divorce and one spouse has taken it,
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  that the other party's name is removed from it, and
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  that there's some clause in the divorce judgment requiring that
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  that take place. Otherwise a party could be in trouble
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  down the line, and their credit could be impacted. And
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  this can be a big, big issue. It's a big
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  reason to hire a lawyer when you're going through a divorce,
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  even if you think it's going to be an easy
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  in a settled case. All right, let's go through some
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  other questions. What debts are considered merial debts? Again, in
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  an equitable division state, any debts acquired during the marriage
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  or going to be marital debts, and that would include
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  just about anything, you know, I mean, it could be
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  credit card debt, could be student loan debt, could be
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  that one party bought a vehicle, could be that one
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  party took a personal loan. If parties are married and
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  that debt is accrued during marriage, then it's marital debt.
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  And the only real exception of that would be in
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  a situation where there's a post nuptial agreement that the
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  parties had and they agreed in writing that you know,
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  these are your debts, these are my debts, and there
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  isn't going to be a blending of these debts. But
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  in the absence of that, anything, any debt accrued during
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  marriage is going to be marital debt. All right, So
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  The next question a lot of individuals have, is asset
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  and debt division always equal, So the courts in an
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  equitable division state always divide this in half. And the
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  answer to that question is not necessarily in an equitable
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  division state, okay, courts divide marital property and marital debt
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  in a just manner when considering certain factors. Okay. And
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  each state it has a statute that's going to deal
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  with property and debt division, and courts can look at
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  all kinds of things, including the length of the marriage,
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  each spouse's earning capacity. It could be tax consequences, it
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  could be other factors. In some states, could be marital misconduct.
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  In other states that's not allowed. Okay. So look, dividing
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  property and debt isn't just a straight fifty to fifty.
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  It's not a deal where it's like a butcher just
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  chopping it in half and each party gets half. And
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  this is something a lot of individuals miss. They think
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  that everything is always going to be divided in fifty
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  to fifty, and that's not necessarily the case, which is
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  why parties should have a lawyer. I think most judges
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  would start kind of with it. The idea that fifty
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  to fifty is a good general presumption, but doesn't mean
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  that's where the court's going to end up. In some cases.
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  It could be fifty five to forty five. It could
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  be sixty forty, it could be seventy thirty. Obviously, courts
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  got to rely on factors to do an unequal division.
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  But it's not necessarily just a fifty to fifty kind
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  of division of marital property and debt. All right. Another
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  question individuals have is what's the difference between marital and
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  separate property. Again, separate property separate debt is something somebody
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  had before the marriage, right, so they accrued it before
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  the marriage. And then there's other possibilities too, Like they
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  inherited some property, it was gifted to them, let's say,
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  or it was delineated by a prenuptial agreement, post nuptial agreement,
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  that kind of thing. But otherwise, all property and debt
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  in an equitable distribution state is going to be presumed marial, okay,
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  And so that is very very important for individuals to
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  understand and to keep in mind. All right. So again
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  trying to give you a summation of how debt works. Again,
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  debt that parties bring into the marriage is typically their own.
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  Debt accrued during marriage is typically going to be marital debt.
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  It doesn't matter whose name is on that debt. Ways
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  around that would be a prenuptial or a post nuptial
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  agreement something like that, But in a general sense, debt
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  accrued during marriage is going to be marital and it's
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  important if you're going to be getting divorced and there's
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  a lot of debt that there's a lot of clarity
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  and the divorced judgment indicating who's taking what debt. And again,
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  if the debt is in both parties name and one
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  party is going to take it, it's almost always vital
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  to have the other party's name removed from the debt, okay,
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  And that could be through a refinance, that could be
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  through an assumption agreement, which is something I've seen in
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  the past, and there's potential other possibilities as well. But
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  one thing parties definitely don't want is if they're not
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  going to be responsible for the debt. I mean almost always,
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  they're not going to want their name remaining on that
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  debt because if the other spouse doesn't pay, then the
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  divorced judgment isn't going to prevent the creditor from coming
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  after them as well. All right, so definitely an interesting
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  topic one I wanted to cover here today. As a
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  follow up to the episode, go on over to our
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  blog on Stangy Lawfirm dot com. Read the article titled
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  is your former spouse's debt Your Responsibility? The date of
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  the article is February fourth, twenty twenty five. This will
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  give you more information. But thanks for tuning in today,
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  stay tuned our next episode of Family Law Talk coming up.
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  Thank you very much.
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  Speaker 1: Thank you for listening to Family Law Talk with Kirk Stangy.
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