When a couple divorces in New York, it’s not only marital property that must be fairly evaluated and divided. Any debt accumulated during the marriage (and acquired for the benefit of both parties or their children) must also be equitably split between the spouses. Common examples of such financial obligations include:

  • Mortgages
  • Car loans
  • Personal loans
  • Credit card debt
  • Student loans taken out to benefit the marriage

It is even possible for debt that each spouse acquired before the marriage to become a marital obligation provided that the couple demonstrates intent to manage the debt together. If the husband has $5,000 outstanding in a personal loan when the marriage takes place and the wife uses her money or money from a joint account to pay it down, it arguably becomes a marital responsibility.

The division process

Debt is divided using the same process applied to marital property division. The spouses can come to their own agreement, or a judge may issue an order specifying which person is responsible for which debts. In the latter instance, the court will consider factors such as:

  • The amount of the debt
  • Why and how it was acquired
  • Who benefited the most from it
  • Each spouse’s finances

Courts have a certain amount of discretion when it comes to distributing debt. For example, a couple may have taken out a line of credit together, but if the husband used most of the money to take expensive vacations with a girlfriend or the wife spent most of the funds to saddle her husband with post-marital debt, the other party will likely not be held liable for repaying that money.

Student loans

Student loans are a comparatively gray area. If someone decides to go back to school while married and takes out a student loan to do so, then is that a marital debt? There are no hard and fast rules in this instance, so courts will look at circumstances like:

  • How the person spent the money: If the loan was used to cover educational costs like tuition and textbooks, then it will likely be treated as a private debt. If, however, it covered living expenses that the other spouse benefited from, such as food and rent, then it may be treated as marital.
  • Whether or not a degree was awarded: Professional degrees awarded while married are treated as marital property in New York.
  • Who benefited from the degree: If the degree resulted in a higher income that benefited both parties, then the loan is more likely to be considered marital debt.

Be careful what you wish for

During a divorce, people may be anxious to retain control over certain types of property, such as the marital home, a vacation property, timeshare, or another large asset. It is important, however, to consider the tax debt implications of retaining certain property and understand both the advantages and disadvantages of every asset or debts that they may be awarded. It may be advisable to sell an asset to avoid having to refinance a mortgage or accumulate a tax debt.

Marital debt and its equitable division can be a complicated process, given the number of circumstances that may apply. If you are planning to divorce and need advice and assistance with marital debt issues, contact an experienced New York divorce attorney. Jayson Lutzky has been practicing law for more than 33 years and handles divorce and family court cases. If you have any family court questions, then do not hesitate to set up a free in-office initial consultation. Call 718-514-6619 to set up your appointment or visit www.MyNewYorkCityLawyer.com. Your attorney will help you ensure that any debt assigned to you is indeed yours or a fair assignment according to the circumstances.