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  • Writer's pictureKyle Persaud

How Do Courts Divide Debt in Divorce Cases?

Often, when spouses get divorced, one or both spouses owe debt. Recently someone asked me, “What happens to debt in divorce cases?”


If debt is the separate debt of one spouse, then the court should order that spouse to pay the debt. However, if the debt is marital debt, the court will usually divide the debt “equitably” between the spouses, and order one spouse to pay a portion of the debt, and the other spouse to pay the remaining portion of the debt.


What is considered “marital debt?”


Debt is considered “marital debt” if the debt is “jointly-acquired debt in furtherance of any marital goal.” There is no hard-and-fast rule to determine whether debt is jointly acquired debt in furtherance of a marital goal. However, a few Oklahoma court cases shed some light on the issue.


In Whitley v. Whitley, the husband had taken out debt before he married the wife. The court held that, because husband had assumed the debt before the marriage, it was not marital debt. Therefore, the husband had to pay all of it.


In Forristall v. Forristall, the husband, during the marriage, had borrowed student loans to go to medical school. The court held that these student loans were marital debt, because husband’s attending medical school was a “joint goal” of the parties. The court ordered both spouses to pay a portion of husband’s student loans.


In Sien v. Sien, the husband took out a loan to help him pay off a note on the family farm. Although the wife did not sign the note, the court held that this debt was marital debt, because establishing the family farm has been a goal of both husband and wife. The court ordered wife to pay a portion of the debt.


However, in Sien, the court held that there was another debt that wife did not have to pay. This was a debt that husband owed to American Bank. Husband claimed that this loan was marital debt, but he offered no evidence that the debt was used for a marital goal. So the court held that Husband did not have to pay it.


In Kingery v. Kingery, Wife has borrowed money from her father to pay both spouses’ taxes. The court held that this was a marital debt, because paying the taxes was a marital obligation. Thus, both spouses had to pay a portion of the debt.


In Bills v. Bills, Husband had exclusive control of both spouses’ finances, and had intentionally depleted the martial property to try to hide his unemployment. The court held that because Husband had depleted marital assets, the debt was Husband’s separate debt, and not marital debt.


In Thompson v. Thompson, the wife had been convicted of embezzlement and order to pay restitution. The court held that Wife’s debt was not marital debt, because “debts from criminal activities are not marital debt.” So, the court ordered Wife to pay all of this debt. Wife had argued that because Husband had benefitted from her embezzlement, the criminal penalties should have been partly Husband’s debt. But the court refused to hold that a criminal penalty was marital debt.


If the court rules that your spouse has to pay, the creditor can still sue you if your spouse doesn’t pay


I have had clients whose spouses had been ordered to pay marital debt. However, my client’s spouse didn’t pay, and then the creditor sued my client. In such cases, my client often comes into my office and asks, “But how can the creditor sue me? Didn’t the court order my spouse to pay this debt?”


Here’s why the creditor can still sue you: Because the creditor was not a party to the divorce case, the court’s judgment in the divorce case cannot alter your obligations to the creditor. So, if a court in the divorce case ordered your spouse to pay the debt, the creditor can still sue you if your spouse doesn’t pay. My clients hate it when I tell them this, but unfortunately, it’s true.


You do have a remedy, though, if your spouse doesn’t pay a debt that the court orders her to pay: You can ask a judge to hold your spouse in contempt of court. Contempt of court is defined as willful disobedience to a court order. So, if a court ordered your spouse to pay and she doesn’t pay, then she has willfully disobeyed a court order. Contempt of court carries a fine of up to $500, and up to six months in jail.


Need help? Call the Persaud Law Office


If you have issues with debt related to divorce, we can help you. The Persaud Law Office has helped many clients with divorce-related debt, and we can guide you through the complexities. If you have any questions regarding your debt after a divorce, contact us today.

 

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