Responsibility for Debt After a Divorce

Who Gets the Debt in a New York Divorce?

In determining who maintains responsibility for debt after divorce, you must first consider whether the debt is separate or marital property. Separate debt refers to assets and debts acquired solely by one spouse before the marriage or through inheritance or gifts during the marriage. For example, a car you owned prior to the marriage remains separate property, even if used during the marriage. Similarly, student loans you took out before the marriage are generally considered separate debt.

Marital debt includes assets and debts acquired during the marriage by either spouse. It includes jointly owned property like a house, jointly held credit cards, and even individual debts used for marital purposes. For instance, a credit card used to pay for family vacations or home renovations is considered marital debt.

Once you have classified your debts as separate or marital, you can either work to determine the debt division yourself or leave the decision with the courts:

Reaching an Agreement Yourself

While the court ultimately decides in contested divorces, reaching an agreement with your spouse and filing uncontested is often preferable. This allows for a more amicable resolution and can save on legal fees. Consider these options:

  • Negotiation. Open communication with your spouse and their lawyer can lead to a negotiated settlement on debt division. Financial mediation can facilitate this process.
  • Debt buyout. One spouse may choose to buy out the other's share of the debt by offering them a larger portion of assets. This approach requires careful consideration to ensure long-term financial stability.

Courts Divide Debts Equitably

Just like your assets, New York law dictates that marital debt will be divided based on equitable distribution laws (see New York Domestic Law § 36). In determining what a fair split would be, the court will consider:

  • Who contributed to and benefited from the debt. The court will consider whose name the credit card, loans, and other debt are in, and they will consider who the debt benefited. For instance, if one party is a heavy spender, the court may force them to take on the majority of the marital debt.
  • Why the debt exists. If the debt was accumulated for the mutual benefit of the couple or for familial needs, then the court can consider dividing the debt equally.
  • What the timing of debt accruement is. Wasteful dissipation refers to a spouse's deliberate squandering or misuse of marital assets during the separation or divorce process. This can include excessive spending on luxuries, gambling sprees, or even intentionally racking up debt. In the context of debt, a spouse might try to max out credit cards, take out unnecessary loans, or neglect existing debts to inflate the marital debt pool. This is a tactic to reduce the value of assets the other spouse receives during the settlement and ultimately leave them with a larger burden of debt post-divorce, which is why knowing when the debt was attained is important.

Special Considerations | Marital Agreements

If you have a pre- or postnuptial agreement, you likely outlined how debt would be divided in the event of a divorce. Thus, the party responsible for debt is based on the terms of your marital agreement.

The Importance of Your Date of Separation

The date of separation in a divorce is a critical factor that significantly influences the equitable distribution process. This specific date marks the point at which you both decided to end your marital relationship, effectively stopping the accumulation of marital assets and debts. It serves as a clear boundary in determining what property is considered marital and, therefore, subject to division between the parties.

The significance of this date lies in its role in ensuring a fair and just allocation of assets and liabilities accumulated during the marriage. By establishing a precise cutoff point, both parties have a transparent understanding of what is included in the marital estate, which in turn aids in negotiations and settlements or in guiding the court's decisions if the matter proceeds to litigation.

How to Prove the Date of Separation

In some cases, spouses may disagree on their separation date. Should you disagree, you can establish the date by:

  • Gather documentation. Look for concrete evidence that marks the separation. This could include lease agreements for new residences, records of opening separate bank accounts, or communications where you or your spouse declared the marriage over.
  • Consider actions taken. Beyond physical separation, consider actions that demonstrate an intent to end the marriage. This might involve hiring a divorce attorney, filing for legal separation, or updating estate plans to exclude your spouse. You can show the emails about appointments with the divorce attorney or show when documents were filed.

The key is to pinpoint a date where both physical separation and the intention to end the marriage were evident.

Talk with Our Attorneys

If you are worried about the debt division process, the attorneys at Arnel Law Firm can discuss your case with you. Offering you personalized insights and counsel, we can walk you through your legal rights and options as well as discuss potential case outcomes.

To learn more about how we can help you or schedule your free initial consultation, contact us at (718) 550-3024.