Equitable Distribution of Marital Debts Explained

Equitable Distribution of assets and debts is a key part of any divorce. As a Divorce Lawyer on Long Island, I see that the major concern for couples going through a divorce is how debts and liabilities will be shared once the spouses go their separate ways.

Nassau County and Suffolk County courts provides for equitable distribution of both assets and debts, which means that debts can be split between the parties in a manner that is determined by the court to be most fair and equitable. This does not always mean that the debts will be split in half, but instead means that the court will determine what manner of division is the most fair and even. Mortgages, personal loans, credit card debt, student loan debt, tax liabilities, and some business loans may be divided in equitable distribution.

The courts look to several factors in order to make the determination of how the marital debts will be divided. The nature of the debt, which party incurred the debt, for what reason the debt was incurred, and to whom the debt is owed, are all of importance in determining how to divide them. Generally, any debts incurred during the marriage are considered marital debts, and are therefore subject to equitable distribution. The party who wishes to share the debt with his former spouse has the burden of proof as to why the debt was incurred and whether it was for the benefit of both parties.

Marital debts are often distributed in the same manner as marital assets. However, the distribution of the debts may be different in cases where one spouse has a significantly greater ability to pay, or one spouse is solely responsible for incurring the debt obligation, and incurred the debt for his or her exclusive benefit. In some instances, a debt is incurred by one party and only for the benefit of that party. For example, an obligation that was taken on by one spouse solely to promote his or her interests and benefit may be determined to be a separate obligation. Courts look to all of these factors to determine what is truly equitable in each case.

Tax liabilities incurred during the marriage are also marital debt and subject to equitable distribution. If a spouse fails to file tax returns, this generally results in shared tax liability when it comes time for equitable distribution. In such cases, courts will still acknowledge that debt as marital debt and split the debt equally. The circumstances of each individual case are very relevant in predicting how a court might respond.

In another case of tax liability, the debt itself was split between the spouses but the penalty was allocated to the at-fault spouse. However, in cases where the tax liability is the sole fault of one spouse, it is possible that a court will place that responsibility on the at-fault spouse. For example, where spouses file separate tax returns, and one spouse had no idea that the other spouse did not file his tax returns as expected, a court found that the spouse who paid her taxes each year had no role in the behavior of her at-fault spouse. Frey v. Frey, 892 NYS2d 159 (NY App. Div. 2d Dep’t 2009).

Student loan debt incurred during a marriage is also considered marital debt. Usually, a student loan benefits both spouses when its incurrence ultimately leads to a degree and increased earning capacity, or when the loan money was used to provide for living expenses. This type of debt will also be evaluated by the court in terms of equitable distribution, and ultimately will be split between the spouses in a manner that seems the most equitable to the court. Nassau and Suffolk County courts will also consider the factors discussed above, such as which spouse has the greatest earning power and ability to pay the debt, and who has benefited from the debt and for how long.

Contact An Experienced Long Island Divorce Lawyer With Any Questions About Equitable Distribution

The attorneys at the Office of Robert E. Hornberger, PC can answer any questions you might have about how your debts and liabilities may be split upon your divorce in New York. These attorneys are experienced in all types of divorce and family law matters in Nassau County, Suffolk County, and the five boroughs of New York City, and consistently achieve positive outcomes for our clients. Contact our office today at 631-923-1910 to schedule your free initial consultation.

For more information about Property Division in your divorce, visit our Complete Guide to Dividing Property in Divorce.