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Debt Distribution

Arguing for or Against Debt Distribution in Divorce

3d human with golden dollar Often, when couples think about the things that need to be separated and split during a divorce, they think about assets, family homes and money. However, there are other things to consider too - like debts and loans. Before a divorce can be fully settled, the courts need to decide who has should take responsibility for certain debts, and how those debts are going to be paid. Often, to show the courts that a debt needs to be split between both parties, the couple will need to provide crucial information with the assistance of a divorce lawyer like Mr. Darren Shapiro. This information will need to show that the debt was taken out for the benefit of the family, the other party, or the household. This is what we call marital debt which get equitably distributed along with marital assets.

Most of the time, debt that exists when a divorce is filed is often open to consideration by the courts as a marital debt. However, any debts taken after the divorce case has been filed usually do not have traction in a case. Of course, Mr. Shapiro and other divorce lawyers like him know there might bd exceptions to this rule. For instance, in the case of GT vs AT, 980 N.Y.S.2d 255, 256 (Suffolk County S. Ct. 2014). the court seemed willing to consider debts incurred while the divorce was still ongoing. However, the court eventually ruled that it would not distribute the debt incurred during the pendency of the split, as neither side could show evidence that the debt was incurred with the other side's permission.

In the case mentioned above, the plaintiff had a Visa and Mastercard in the defendant's name, and a Discover card in their own name. The two parties accrued debt on all of the cards during the pendency of the case. However, because no evidence was available to show that the debt was incurred for the benefit of the other party, the debt was not treated as marital. Usually, Mr Shapiro finds that if a party to the case wants the other side to share in debt while the case is pending a pendente lite order may be necessary.

How to Prove that Debt is Marital

When Mr. Shapiro works alongside clients that want to split their debts in a divorce, he often needs to spend some time speaking to them about how evidence can be submitted to the courts to show that the debt was intended for marital purposes. As a divorce attorney, Mr Shapiro can also try to assist his clients in showing that debt was not used for marital reasons when they would like it to remain the separate responsibility of the other side. For instance, in McCaffrey v McCaffrey, 967 N.Y.S.2d 162, 166 (3rd Dept. 2013) case, a failure to rebut testimony that debt should be defined as marital caused the court to accept that the debt should be treated as marital. Because the other party couldn't show that the debts should be separated, the courts had no choice but to treat them as joint debts.

The courts of New York and Long Island generally consider a wide range of factors when equitably distributing the debts in a divorce. For instance, the courts can look at the future employment prospects of both parties, the respective income of the parties and the history that the plaintiff had of using credit cards in the other’s name. The court also might examine the use of a 401k plan funds to pay unwanted debts. This is all part of what might be considered in equitable distribution.

The courts of New York look at many different factors because deciding which debts should be separate and which should be marital isn't always simple. In one case regarding Holsberger v Holsberger, 63 N.Y.S.3d 559, 562 (3rd Dept. 2017). the courts found that the husband in the case should have full responsibility of a credit card used since the divorce was filed, and that the wife hadn't used the card since the divorce began. In this case, the court could easily say that the credit card belonged to the husband exclusively and that the debt shouldn't be shared with the wife.

Do Debts Need to be In Place before the Divorce Begins?

Divorce attorneys like Mr. Shapiro can help their clients understand the rules and restrictions surrounding the distribution of debts and assets in a divorce. For instance, in one case known as AG vs SG, the courts didn't distribute debts between both parties when those debts were accumulated while the divorce was pending. However, the courts did distribute the debts that were already present when the divorce was filed. The courts found that the debts should be shared between both parties, as they were accumulated within the marriage. The idea that debts need to be in place before the divorce is filed to be considered is common in many divorce equitable distribution cases. Interestingly, the case of W.S vs. A.S found that marital debt needs to be present before a divorce is filed. However, because there weren't any documents submitted by the parties involved to highlight who debts should belong to, the courts still didn't distribute the debts.

If you're worried about equitable distribution issues, or you want to learn more about how debts and assets might be split between you and your ex-partner during a divorce, it's a good idea to speak to a divorce attorney like Darren M. Shapiro. Equitable distribution can be a complex issue to understand, particularly when loans and debts are involved, and Mr. Shapiro can help to talk you through your options.

You can contact Mr. Shapiro to discuss your case at (516) 333-6555, or use our online contact form to reach out. Couples thinking about using divorce mediation for their case should arrange for their initial free appointment together.

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