Strategically helping Colorado clients through divorce & custody cases
Published on:

Marital Debt (Joint vs. Individual) in a Divorce

mock-credit-card-1-1204846-300x196By:  Sarah T. McCain

In every Colorado divorce proceeding, the court will require each party to complete and file a Sworn Financial Statement.  This requirement regarding financial disclosures in a divorce comes from C.R.C.P. Rule 16.2. Among the variety of items that you are required to list on that SFS is debt, including both marital and separate debt items. This includes, but is not limited to, credit cards, student loans, outstanding tax obligations, and medical obligations. On this document, it is important to list all of your debt so that the court is able to properly divide all of the marital debt that has been incurred during the marriage. One question that attorneys get in these cases is whether the debt is joint marital debt which should, thus, be divided. It is a common question and one that is derived from a common misconception that if the debt is not in your name, it is not marital. This is not the case in most situations. 

There are some debts that do follow this standard for the most part. Specifically, student loans are generally something that go with the party who incurred the loan for the purpose of their education. The student is usually the one that is benefitting from the education and thus, the debt goes with them. Of course, nothing is so black and white. There are circumstances when a student loan can be divided as marital debt. When a student loan obligation is incurred during the marriage, the court does have the authority to divided the student loan obligation between the parties.  In doing its analysis, the court may look at things like whether proceeds from the loan were used for marital expenses, such as mortgage or utilities.  A court might also consider whether that loan ultimately benefits both parties financially in that the loan may have led to a degree, which led to a better job, which may impact the spousal support or alimony the other party pays or receives.   Therefore, though the norm might be to have the person incurring the student loan be responsible for paying it, courts can divide student loan debt and may do so in certain circumstances.

When tax obligations are to be divided between the parties, it can be easy to argue that if there was a discrepancy in the income, that the tax obligation should be divided proportionate to the parties’ individual incomes.  However, the norm in dividing tax debt would be for it to be divided equally, regardless of the income disparity, as both parties benefitted from that income. Therefore, both parties will more likely be responsible for the division of that tax debt. 

Credit card debts cause significant confusion when dividing them. When a credit card is in one party’s name, it can still be marital property. When a debt has been incurred for marital purposes, it is marital, despite the name on the card. The next question is then what is a debt for marital purposes? When a person uses a card for groceries, gas, normal clothing, or really anything for the home or the family, it is considered marital.  Litigation or arguments can arise regarding debt tied into the purpose for which is was incurred.  Credit card debt for things like extravagant, individual expenditures, such as diamonds, furs, or a week stay for on spouse at the Four Seasons in Bali may not be considered marital.

In any case, detail matters. During a divorce case, we, as attorneys, do have the option of issuing discovery. This allows us to ask for two years of debt statements, or more, from the other party.  By getting the actual credit card statements, attorneys are able to track spending to look for the abnormal or excessive.  Going through two years of debt statements can be time consuming prior to litigation.  Furthermore, the court generally does not have the time to look through multiple statements to review credit card transactions to determine if it marital or not.  If it is a large transaction that is clearly not marital, then it is likely worthwhile to raise the issue at your divorce hearing. However, if you are pointing out small transaction after small transaction, the court may request that you move on and will then order the balance to be split equitably. The court simply does not have time on the docket to go through a significant number of debt statements.   When debt is an issue, it is imperative that your attorney be concise in presenting your arguments to the court, which need to be backed up by the specific statements of relevance.

Finally, when you are dividing up debt as part of a dissolution proceeding, it is always a good idea to request statements from as close to the date of marriage as you can to ensure that you are not being awarded debt that was incurred prior to the marriage taking place.  Debt incurred prior to the marriage is not going to be considered “marital debt” and is not part of the overall analysis. These statements should be provided as part of the initial disclosures, but if they are not, you do have the ability to request statements as part of the discovery process. 

Sarah-2018-Individual-240x300