Where is the Dividing Line Between Marital Debt and Marital Misconduct?
Debt has ruined the marriages of many couples, including some who had every intention of honoring their wedding vow to stay together for richer or for poorer.
Sometimes the constant stress of having to decide, on every payday, whether to pay for groceries or utilities, while the debts just keep getting bigger even as you make payments on them, is just too much, even for couples who are truly dedicated to each other.
Of course, taking on debt in open defiance of your spouse’s wishes is not a recipe for a healthy marriage, and judges in divorce cases hear about this problem all the time.
Even worse, borrowing money behind your spouse’s back, which personal finance experts sometimes refer to as “financial cheating” or “financial infidelity” is even worse, and if this happened in your marriage, its seriousness will not be lost on the judge in your divorce case. If debt ruined your marriage, a Central Florida divorce lawyer can help protect you from your ex-spouse’s debts following you around as you try to rebuild your life.
What Is The Difference Between Non-Marital and Marital Debts
Dissolving a marriage necessarily means dividing the couple’s assets and liabilities; in both cases, equitable distribution, in other words, fairness, is the guiding principle. The default assumption is that all assets acquired during the marriage are marital property, and all debts incurred during the marriage are marital debts.
An exception to this rule is that money that one spouse inherits or is awarded in a personal injury lawsuit is separate property. The money remains your separate property unless you treat it as marital property, such as by depositing it in the marital joint bank account or spending it on a house or other asset titled both in your name and in your spouse’s name.
Meanwhile, debts incurred during the marriage are almost always classified as marital debts unless you have a prenuptial agreement that says otherwise. For example, if your husband is a partner in a business, your prenup might say that his ownership interest in the business, as well as all debts associated with it, are his separate property. If both spouses had student loan debt going into the marriage, you might also specify in your prenup that if you divorce, neither spouse will be responsible for the other’s student debt. (Even when people sign prenuptial agreements to this effect, they often do contribute to paying down each other’s student loans as much as their finances allow.)
Marital Misconduct and its Effect On Debt In Divorce Cases
For many couples, the conflicts about spending and borrowing began many years before they filed for divorce. The default assumption in Florida is that it takes two to ruin a marriage; divorce is no one’s fault, and both parties should get their fair share of the marital property, no matter who was right or wrong about the issues that led to the divorce. If there was marital misconduct, though, the court might compensate the victim spouse for it by awarding him or her a greater share of the marital property.
If your spouse borrowed money after you told them you did not want them to or made a risky investment despite your objections, that does not by itself constitute marital misconduct. If your spouse deceived you about money over a long period of time, it might be marital misconduct. If your spouse used marital funds to provide financial support for an affair partner, that is definitely marital misconduct. (Simply having an affair does not always count as marital misconduct.)
If the court finds that your spouse’s actions amount to marital misconduct, the court is more likely to grant your request for alimony or your request to stay in the marital home, for example. Even if there was no marital misconduct, though, the court is still obligated to give you your fair share.
The Man Who Forged His Wife’s Signature on a Home Equity Loan
Barry Mills, a serial entrepreneur, had already seen several business ventures come and go by the time he married his wife Brenda. Brenda was generally supportive of Barry’s career path and patient with the ups and downs of waiting for businesses to become profitable and cutting one’s losses if they failed to do so. When Barry and several business partners had the idea to found a startup bank in 2007, Barry asked Brenda to take out a $100,000 home equity loan on the marital home, so that he could complete his share of the startup funds. Brenda refused to sign for the loan, because she thought that the project was too risky. She did not want to risk losing their house if the project failed, as new business projects often do.
Barry forged Brenda’s signature on the loan application, took out the home equity loan, and went ahead with the project. The bank never opened because the state of Florida refused to grant it a charter when it applied for one, and Barry lost a total of $245,000 in the process. Needless to say, Barry was unable to repay the loan. Soon, Brenda got a phone call from a creditor threatening to take the house if she did not start making payments on the loan, which she had not known existed. That was the beginning of the end of Brenda and Barry’s marriage, which lasted more than three decades.
When their divorce went to trial, the judge classified the home equity loan as a marital debt and held Brenda responsible for repaying part of it. Brenda appealed the decision; in her appeal, she argued that Barry’s actions constituted marital misconduct, namely taking out the loan without her knowledge and even forging her signature on the application. The appeals court sided with her, agreeing that Barry’s actions counted as marital misconduct, and reclassified the loan as Barry’s separate debt.
Contact Sean Smallwood About Divorce Cases
If you and your spouse disagree about how the court should divide your debts in your divorce, a divorce lawyer can help you. Contact Sean Smallwood in Orlando, Florida for a consultation.