Dividing Marital debt in New York
Trusted Counsel for Complex Debt Division
When going through a divorce, the division of debts and property can be extremely confusing. This is especially true in situations involving marital debt or high net worth individuals.
When significant debts are involved, there are several things that need to be sorted out before the divorce can be finalized.
Let our firm help you reach a favorable arrangement regarding the distribution of your marital debts—Call Hedayati Law Group P.C. today!
How Are Marital Debts Divided in a Divorce in NY?
New York is an equitable distribution state, meaning that both marital property and debts will be divided between spouses during divorce in a manner that is considered equitable, or fair. It is important to note that this does not always mean equal, as the court’s decision on what is fair will be influenced by numerous factors that evaluate a spouse’s overall contribution to the marriage.
Equitable distribution laws will only take effect in the event that separating spouses cannot come to an agreement on their own regarding the distribution of debt. Spouses can avoid having the state decide this issue by collaborating towards a mutual debt-sharing agreement.
Defining Marital vs. Separate Debt
Before debts can be divided, they must be classified as either marital or separate. Marital debts are any financial obligations that are incurred throughout the course of the marriage and are the equal responsibility of both spouses regardless of who incurred the debt. Conversely, debts that are incurred before the marriage or after the date of separation are considered separate and are the sole responsibility of one spouse. An attorney from our firm can help you classify your debts, learn who incurred them, when they were incurred, and how the debt was used.
All debts must be divided, including:
- Car loans
- Home loans/mortgages
- Credit card debt
- Student loans
- Personal loans
- Medical debt
- Utility bills
- Business debts
- Payday loans
It is often a wise choice for spouses to close any joint accounts they share as soon as they decide to get divorced. Doing this will prevent one spouse from incurring additional debt under a joint account which could negatively impact the other spouse’s credit rating.
How Can Debts Be Divided?
In order to determine a reasonable division of the debts and assets, also known as equitable distribution. Domestic Relations Law §236B provides thirteen statutory factors, which are used and can be achieved by agreement, settlement or judgment by the Court. An agreement or settlement allows each individual to create specific financial arrangements in regards to specific debts and the division of property. If an agreement cannot be made between the two divorcing spouses, the Court will then review the case and make its own judgment.
The court’s judgment will be based upon:
- Financial information: Debt that you accrued while married may be a form of marital property but it can be divided up to be one spouse’s problem more than the other’s. If you are more financially stable than your ex-spouse, you may be expected to pay more than half of the remaining debts.
- Characteristics of the marriage: The actual history and overall well-being of your marriage, up to the point of divorce, of course, may actually sway a judge’s decision when it comes to dividing up debts. For example, if you were a stay-at-home mom or dad and were not expected to be in charge of finances, you might not be expected to be in charge of debts afterward either.
- Length of marriage: If your marriage did not last more than a year or two, the court may assign debt responsibilities based on the actual debts you had before eloping. If your marriage lasted for several years or decades, the distribution is more likely to be even, regardless of other factors.
- Spending habits: Nothing upsets a court more when choosing how to divide a divorcing couple’s debts more than evidence of fiscal irresponsibility. Can you prove that your ex-spouse had reckless spending habits? Gathering receipts and credit card histories may be able to spare you from shouldering the majority of debts they alone created.
- Household contributions: There is value in the work someone puts into the care of their family but it might not be quantified in dollars and cents. A divorce court may take it upon themselves to try to determine this unspoken value. The spouse that made more household contributions, such as raising children or cleaning the property regularly, may be handed less debt accountability.