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How do the New York courts divide debt in a divorce?

On Behalf of | Jul 29, 2021 | Property Division |

For the duration of your marriage, you and your spouse have shared financial resources. You have probably pooled your income to pay bills. You likely jointly own your home and other major assets, like vehicles. You may also incur debts together while supporting your household.

Many people thinking about a divorce become so fixated on how to split their assets that they don’t stop to think about dividing their debts. In a litigated New York divorce, the judge will use equitable distribution rules to divide not just your property but also your debts.

How do the courts decide what is reasonable and fair when splitting up the money you owe?

The name on the account is not the most important factor

There is a common presumption that only shared accounts produce debts that couples will have to divide in a divorce. However, the name on the credit card or line of credit won’t be nearly as important as when someone accrued the debt and what the purpose of the debt was.

Just like the income you earn while married is marital property, so too are your credit card balances in most cases. The purchases that go to support your household will obviously be marital debts. Even a spouse’s selfish shopping habits can come back to haunt their partner in a divorce.

You could wind up accountable for a significant amount of your spouse’s maxed-out credit card that they constantly use for online shopping. The judge will look at the totality of your marital assets and debts and then try to figure out how to split them between you fairly, which often means splitting the debts.

Can you avoid taking on certain debts?

There are situations in which spouses can avoid responsibility for marital debts. For example, a dependent spouse with no income may not have to pay back marital debt, but a judge may reduce their share of the marital assets to reflect how much of the debt their spouse must pay.

In cases where one spouse maliciously accrued debt or used credit cards for purposes that damaged the relationship, like adultery, it may be possible to ask the courts to exclude those amounts from the marital debt divided in the divorce proceedings.

Understanding what happens with debt in a New York divorce can help you plan for your financial future.