We have previously discussed the difference between marital and non-marital property. There is also a difference between marital and non-marital debt. With property, the court will start off with a presumption that property acquired during the marriage is marital property. That is not entirely true with debt.
The true inquiry that must be made is did the debt serve a marital purpose. This is a fairly broad concept that looks to a number of factors:
As a general rule, most debts incurred during the marriage will be marital debts. This would include mortgage debts, car payments, etc. However, many times a spouse will be in the midst of a divorce and through the discovery process learn that there are credit card debts or other obligations of which he/she was not aware. Then the inquiry must be made as to why this debt was incurred. One example might be where a husband is shocked to learn that his wife has an electronics store credit card with a debt of two thousand dollars. Nevertheless, he is well-aware of the fifty inch television sitting in his living room that appeared after one of the wife's shopping excursions. The family has benefited from the television and absent some other odd circumstance, that debt will be considered marital.
- Did both spouses participate in incurring the debt?
- Did both spouses receive a benefit from the debt or whatever was purchased with the debt?
- Was the debt incurred to purchase marital assets?
- Was the debt necessary to support the family?
- Was the debt incurred for a non-marital purpose or one that did not benefit the entire family?
- The respective economic circumstances of each party to handle the indebtedness.
A converse example, would be a situation where the wife learns of a credit card her husband has. This credit card is used by the husband primarily to pay for time at the local no-tell motel with his mistress. Obviously, this debt did not benefit the family in any way, therefore, it would be a non-marital debt.
I routinely advise clients at the beginning of a divorce to get a copy of his/her credit report to determine if their name is listed on any debts of which they may not be aware. Many are surprised by what they find. Where there is concern about the debts owed by the parties, it becomes very important to secure information on why the various debts were incurred to make sure that you are not burdened with more than your share of the debt.
Photo courtesy of Chris Potter
Labels: debt, discovery, divorce, divorce lawyer, family law, financial declaration, marital debt, non-marital debt