Many couples are well aware of how their assets will be split if they divorce, but few are prepared for how their liabilities (i.e., debt) will be handled. Debt in a divorce can have long-lasting consequences, affecting everything from credit scores to financial stability.

Debt and Divorce

Generally, any debt acquired while spouses are married is considered marital debt, even if only one spouse accrued the debt. This includes loans, mortgages, credit cards, and other financial obligations.

In most cases, debt incurred during a marriage will be split between the spouses, but how that division occurs depends is also addressed by the statutes and case law of New York.

New York is an equitable distribution state. If the parties cannot agree to property or debt division, the court will divide marital property and debt equitably. This does not mean a 50-50 split. Instead, the judge will strive for a fair outcome, considering statutory criteria, including:

• each spouse’s income and property when they married and filed for divorce;
• probable future financial circumstances of each party;
• each spouse’s age and health;
• duration of the marriage;
• whether either spouse has an equitable claim to marital property based on that spouse’s contribution of labor, money, or efforts as a spouse, parent, or homemaker;
• whether the court has awarded alimony (maintenance or spousal support); and
• any other factor the court finds to be a just and proper consideration.

Presuming the debt at issue is legitimate marital debt and not debt as a result of one party’s improper behavior (such as debt related to an extramarital affair; gambling or substance abuse habits), the debt will be allocated equitably and in accordance with the above factors. While it may be divided equally if property is divided equally, it may also be divided in proportion to the parties’ incomes especially if there is a significant income disparity which affects one party’s ability to pay.

Protect Yourself

Protecting yourself from financial pitfalls during the divorce process requires careful planning and proactive steps to safeguard your credit and financial standing, including:

Know what debt you have and keep track of it. Do a credit report on yourself and find out what all of your open financial obligations are at the start of your divorce process. Get statements of all of the debt and if charges on credit cards are suspect, get the statements. This will help your attorney discover any charges or debts that you may not be obligated to help pay.

Monitor your credit: Regularly check your credit report to make sure that no new debts or unauthorized transactions appear in your name, which can affect your credit score.

Make sure you have your own credit card: If you share a card with your spouse, consider getting your own and using it to both build your credit and keep a separate accounting of what non marital purchases or charges you may need to make while your divorce action is pending.

Be wary of bankruptcy: If your spouse files for bankruptcy, then even if the divorce decree assigns debt to your ex, creditors can still pursue you for repayment if your name remains on the account.

A spouse has more liberty at protecting their debt position if they seek legal counsel before an action for divorce is filed. New York State Automatic Restraining Orders go into effect once an action is commenced, and limits the parties ability to take action to protect their debt positions.  So seek legal counsel as early in the process as possible.

Speak With a Lawyer Today

If you’re unsure about how debt will be divided in your divorce or need guidance on protecting yourself from future liabilities, speaking with an experienced divorce attorney is the best step forward. An attorney can help you negotiate fair terms, see that your financial interests are safeguarded, and provide personalized advice based on your unique situation.

Contact us today to schedule a consultation and take control of your financial future and debt after divorce.

Tully Rinckey attorneys understand that issues surrounding divorce can be challenging, and they will handle your matter with the attention and tact it deserves. If you have additional questions about dealing with debt after divorce, our team of attorneys is available to assist you today. Please call (888) 529-4543 to schedule a consultation or schedule a consultation online.

Barbara J. King, Esq. is a partner in the Albany office of Tully Rinckey, PLLC. For well over three decades, she has been representing parents, spouses and other parties, as well as clients, nationally and internationally, in a wide range of family and matrimonial matters.