When you and your spouse decide to divorce, you expect that all marital assets will be divided according to New York’s equitable distribution system. But what about the MasterCard bill you ran up together? The line of credit you took out a few years ago that is now at its limit? The student loan you took out to get that education that bettered you as a couple?
In New York divorces, all debts incurred while you were married must be categorized in one of two ways.
- Marital property: You and your spouse acquired the debt together. Examples include the mortgage on the marital home and joint credit cards.
- Separate property: One of you incurred the debt before the marriage or after separation. A common example is getting a credit card in your name after you or your spouse leaves the marital home.
Student loan debts can be difficult to divide because there is no hard and fast rule. Instead, the courts consider multiple factors, such as whether-
- The money covered your daily expenses as a couple
- The spouse who took out the loan did so to improve their ability to support their family
- The other spouse supported the student spouse during the education
What if your spouse doesn’t follow through?
No matter how the court ultimately divides your marital debt, remember that your creditors have little interest in the terms of your divorce decree. If your spouse is ordered (or agrees to) pay off your joint MasterCard while you cover another debt and then fails to follow through, you could still be held responsible for the outstanding amount. Because your name was on the account along with your ex-spouse’s, technically you owe the money too, and MasterCard can opt to come after you for the late payments.
What can you do in a situation like this? If you decline to pay, seeing the debt as no longer your responsibility, then the account could go into collection and your credit score would suffer. You could explain the reason for the reduced score to future lenders if you require a loan, but many of them will let the score guide their decision.
One option is to pay the debt and sue your former spouse. Your Judgment of Divorce should state that you can seek damages from them if they default on debts they are responsible for. While this does not change your responsibility to the creditor, your former spouse will be ordered to compensate you so you can bring the account up to date.
Dealing with debt after divorce can be difficult, but a New York family law attorney can help create a divorce settlement agreement with terms that protect you if the other party decides to default on their assigned obligations. If you are considering a divorce or if your spouse has already initiated the divorce process, then you should speak with an attorney. Jayson Lutzky is a Bronx divorce lawyer. He offers free initial in-person consultations. Please call 718-514-6619 to set up an appointment or visit www.MyNewYorkCityLawyer.com.