How Do I Argue For or Against Debt Distribution In My Divorce?

Swearing-In-300x211Assets aren’t the only thing that may need to be distributed between two parties when a divorce takes place. Some couples need to think about distributing their debts too – particularly when there is a dispute about whether the couple agreed to take on those financial commitments together or not. In order to prove to the courts of New York and Long Island that a debt should be split, parties must provide some crucial information. Most commonly, the courts will require some evidence that the debt was incurred either for the benefit of the other party, the household, or with the other party’s permission. This is a way that something may be considered marital debt, rather than just “individual” debt.

In most instances the debt that exists at the time of filing the divorce will be open to consideration by the courts. Usually, any debts that are taken on after the divorce case is filed won’t have any traction in the case. However, I have found some exceptions to this rule. For instance, in the case of G.T. v. A.T., 43 Misc. 3d 500, 501, 980 N.Y.S.2d 255, 256, the court was prepared to consider any debt incurred when the divorce was ongoing. However, the court ended up ruling that it was not going to distribute the debt that was incurred during the pendency of the divorce, simply because neither side was able to show evidence that the debt was made with the other’s permission.

In the case above, the plaintiff had a discover card in their name and a Visa and Mastercard in the name of the defendant. The two parties had accrued debt on all of the cards during the pendency of the case. However, as no evidence was available to suggest that the debt was incurred for the benefit of the other spouse, or with the other spouse’s permission, that debt was not be treated as marital debt. My experience is that if post filing expenses or debt is going to be an issue that the parties would want to attempt to get a Pendente Lite Order from the court. This is an order that provides for payments to be made for support and expenses while the divorce is ongoing.

Proving Debt Was Incurred for Marital Purposes

When I work with clients in a divorce case who want to split debts, in some fashion between two parties, we would need to talk about how we are going to submit evidence to show that the debt was used for marital purposes. As a divorce lawyer, I can also assist clients with proving that debt was not used for marital purposes when they want those loans to remain separate. If someone is going to dispute a claim that a debt was marital, they will need to submit their own testimony or evidence. For instance, in the case of McCaffrey v McCaffrey, 107 A.D.3d 1106, 1108, 967 N.Y.S.2d 162, 166 a failure to rebut testimony by one side that a debt was marital caused the court to treat a debt as marital. In this case, the wife accused the husband of building significant debt without her knowledge. However, he testified that the debts were made for marital and household expenses.

The wife in the case above denied knowledge or compliance in the credit card debt involved in the case but admitted that the husband had discussed refinancing with her – one of the debts to be considered. Additionally, the party was unable to show any testimony or evidence to suggest that the debts should be separated.

The courts of New York and Long Island will consider a number of different factors when assigning the equitable distribution of debt in a divorce. For instance, in the case of McKeever v. McKeever, 8 A.D.3d 702, 702-703, 777 N.Y.S.2d 781, 781-782, the courts looked at the respective incomes of both parties, the future employment prospects and employment status of each spouse, and the practice that the plaintiff had for using credit cards in the defendant’s name to purchase supplies for his business. The court also looked at the defendant’s use of the plaintiff’s funds from her 401k plan to get rid of debts.

Separating Debts in a Divorce Case

Deciding which debt should be marital and which should belong to an individual in a case isn’t always easy. In the case of Holsberger v Holsberger, 154 A.D.3d 1208, 1211-1212, 63 N.Y.S.3d 559, 562, the courts determined that the husband in the case had full responsibility for a credit card since the judgement of the divorce, and the wife had not used that credit card since before the divorce began. As such, the court was able to say that the credit card belonged exclusively to the husband, and the debt on that card was his to deal with alone.

One case known as A.G. v S.G., 2016 N.Y. A.G. v S.G., 43 N.Y.S.3d 766 involved facts where the court did not distribute the debts between the two parties that were accumulated during the pendency of the divorce. However, they did distribute the debts that were already present by the time the divorce was filed. The defendant argued that the plaintiff should be responsible for all the debts incurred during the marriage. However, the courts found that the debts were shared between both parties during the course of the marriage, and that both parties should be expected to pay towards the repayment of the loans.

The idea that debts should already be in place before the time of filing to be considered in a divorce equitable distribution case is a view shared by many in the courts of New York. The case of W.S. v A.S., 2019 N.Y. Misc. LEXIS 3562, highlighted that marital debt needed to exist at the time of the filing, however, the courts still didn’t make a distribution of the debt that was present at that time because there weren’t any documents submitted by the parties involved to highlight who the debt should belong to. Because of this, both of the parties in the case remained responsible for their own debt. Any credit cards that were listed in both of the parties’ names were split 50/50.

If you’re concerned about things like divorce and equitable distribution, and you want to learn more about getting the right files and documents in place for your divorce, contact my team at your earliest convenience. You can call us at (516) 333-6555 or use our contact form to book your initial consultation, up to the first half hour is free, to discuss the intricacies of your case and decide what kind of step you want to take next. Couples considering me as their divorce mediator will need to have their free initial consultation together.