Proof of Marital Debt and Divorce
Several different categories of issues and potential problems must be addressed in an official court order or divorce settlement. Not only do the parties need to decide various things, including who shoulders the debt accumulated between the couple, but steps also need to be taken for the protection of both parties’ financial futures. Sometimes the parties involved in a proceeding expect to have their loans and debt split in a way that’s different from the way the court rules.
Debt that has been acquired during a marriage can be considered marital debt, just as your home and assets you acquired with your spouse can be considered marital assets. Therefore, marital debt will be shared between the involved spouses. This usually means that during divorce proceedings, a couple can either settle the debt responsibility between them before they file for divorce, or they can make an agreement while the divorce proceeding is moving through the court. If the parties fail to reach a settlement before the divorce proceedings, the court will make the ruling regarding debt responsibility.
New York state has a Domestic Relations Law which indicates that any financial obligations that take place during a marriage, and are not solely the responsibility of one person, are able to be offset against the other accumulated marital assets that still need to be divided. But there must be proof or evidence showing that these debts were originally created for a marital purpose. It’s up to the party or parties claiming to have marital debt to provide evidence which proves that the debt was incurred for reasons related to the marriage, such as paying household utility bills together.
Many factors are considered when the New York state courts are determining the distribution of both marital assets and marital debt between spouses in a divorce proceeding. Marital debt is only one of the potential issues that requires addressing. Usually, when debts are created between two people before any motion is made for divorce, these debts are considered shared marital debt by the court. Meanwhile, if debts are created after a divorce motion has been filed, these debts are only the responsibility of whichever party incurred the debt. That said, the New York state court may use discretion in cases where it is better to offset any outstanding financial requirements of the spouses, provided those obligations are joint responsibilities rather than the sole responsibility of one party. To do this, the court must consider the usual factors involved in equitable distribution along with the presentation of evidence. For a disputed debt to be ruled a marital debt, the person claiming the expense is marriage-related must provide reasonable evidence.
To prove that there is a link between the marriage and the debt, the claimant would need to provide certain documentation. If the only reason that a request has been made for a debt to be considered a marital debt is due to an allegation by both parties, then the court can’t determine how and why the sum of the debt was used. This means that they don’t have sufficient evidence to rule whether the debt was incurred for marital purposes, and furthermore whether or not the debt is a marital debt. When the spouses do not provide the required evidence, the state court will not allocate responsibility like they would for marital assets. Instead, the court will order each party to be liable for the repayment of their own debts that have been occurred solely in their own names.
In the court case Oliver A v. Christina A, the defendant was a husband who wanted the court to allocate responsibility for a number of credit card accounts. The plaintiff wanted the court to allocate responsibility for a number of credit account debts as well as a car payment. Regarding the issue of evidence, the Appellate Division First Department ruled that because the husband could not demonstrate that a loan was incurred for marital purposes, the claim would be disregarded. No receipts or accounts had information regarding the reason the accounts and payments had been created. There was also no documentation proving that the accounts were created in order to pay for services related to marital purposes. If the marriage had received some kind of benefit from the incurred debt, and that benefit had been presented as evidence, the Court might have appointed responsibility between the two parties regarding the debt. But both parties failed to provide this evidence.
The case continued when the wife gave testimony that she had provided her husband with $2,750 at the start of the divorce. But the wife did not offer any proof or evidence that substantiated her claim. She testified that her husband didn’t dispute that he had taken a cash advance of $4,000 from her credit card. The wife requested 50% of the accumulated marital debt instead of engaging in equitable distribution. Several statements regarding the questionable credit cards were admitted into evidence. The court ruled that the wife would not receive credit for the $4,000 that the husband had received in cash, but the court did calculate the marital debt through the credit cards that had been admitted as evidence.
Later, the Appellate court ruled that courts should not undo economic decisions that the parties in a divorce proceeding made together. Instead, the obligations and assets should be equitably distributed by the court. Because the husband took the $4,000 in cash near the end of the marriage, the husband received responsibility for the advance. The wife was given a $4,000 credit according to equitable distribution laws.
Marital debt issue are complex and the allocation of marital debts varies widely on a case-by-case basis. In most cases, credits will not be awarded for marital debt until sufficient evidence is provided as proof that the expenses were incurred as part of the marriage.
We are New York lawyers who are experienced in the allocation of marital debt during divorce proceedings. If you have any doubt about your debt distribution, get in touch with one of our representatives today.