Two Ways You May Get Stuck Paying Your Spouse's Debt In The Divorce
Posted on: 26 August 2016
When you get a divorce, the last thing you want is to get stuck paying debts your spouse incurred during the marriage. However, if you live in a community property state, that's exactly what may happen, even if your name isn't on any of the accounts. Here are two ways this situation can occur and what you can do to prevent it.
Debt Incurred for Family Needs
In states where community property laws govern marital assets and debts, both spouses can be held responsible for paying debts incurred during the marriage while they are together. However, once the marriage dissolves, the debt typically becomes the sole responsibility of the person who incurred it.
However, there is one exception to this rule. If the debt was used to pay for the necessities of life, then both spouses would be held liable for repaying the money even if both names are not on the account. This is because spouses have a duty to support each other and their children; thus you are required to share the responsibility for what it took to provide that support, including acquiring debt to get what was needed.
Each state defines what's considered a necessity for life differently, so you'll need to check the laws in your area to determine what you could potentially be held liable for. Some expenses that would qualify under this rule are the likely suspects such as food, shelter, and clothing. In some states, though, college tuition for children may also fall into this category. In California, both spouses could be held responsible for paying court and attorney's fees, regardless of who incurred them.
One way you could avoid being ordered to help pick up the tab on debt that belongs to your spouse is to prove the money didn't go towards the necessity for living or that your ex used the money for his or her sole benefit. For instance, if your spouse used a credit card to purchase food for his or her mother, then you could argue that you shouldn't be responsible for the bill since the food didn't actually go towards your family's needs.
Another way to avoid getting stuck with your spouse's bills is to negotiate with your ex before you get to court. If you and your soon-to-be ex come up with an agreement on who pays what, the court will typically follow that plan rather than assign the debt. Be sure to get the agreement in writing; otherwise, you could find yourself in a he-said, she-said situation in court.
Separate Property Becomes Community Property
An indirect way you may be stuck pay debt your spouse acquired during the marriage is if your separate property is converted to marital property. Although your spouse may be individually responsible for his or her debt, creditors can go after the value of his or her half of any marital property in states with community property laws. For instance, if you owned a valuable art collection before you got married but the collection became community property during the relationship, creditors could force you to sell the pieces so they can extract your spouse's equity. If you want to save the collection, you would have to pay your spouse his or her portion of the value with cash or other assets.
To avoid this, you will need to prevent your separate property from becoming reclassified as marital property. This can happen if:
- You pay for the asset using commingled funds (e.g. make mortgage payments on a vacation home using funds from a joint checking account)
- Your spouse makes contributions to the asset that increase its value (e.g. add pieces of art to your collection)
Only paying for your asset with money you earned could help you make a compelling argument with the court that the asset is your separate property.
Another way to prevent your separate property from being awarded to your spouse is to develop a pre- or post-nuptial agreement that stipulates what assets are to be kept separate and your spouse's rights to those assets in the event of a divorce. For example, you could agree that any money he or she spends on the asset would be considered a gift, since gifts are typically automatically considered separate property.
For more information about this issue or help with coming up with a strategy for avoiding taking on your spouse's debt when getting a divorce, contact an attorney or go to websites on divorce law.
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