Who Gets the Debt in a New York Divorce?

The distribution of assets is always a major concern in a divorce. People often focus on what they will keep or lose, and it’s easy to forget that debt is a part of marital property.

As an equitable distribution state, New York always endeavors to divide marital assets fairly. Essentially, it’s more important if a spouse deserves property than if they paid for it. This standard applies to the marital debt as well.

Equitable Distribution of Marital Property

Definitions change from state to state, and even within a state, the law can have exceptions to any rule. Generally, however, marital property is anything that was acquired during the marriage. This includes the marital debt. Both spouses own it, and they are both responsible for it.

About nine states still use a “community property division” model, where they try to split all assets 50/50 among the spouses. New York is among the states that use the “equitable division of property” model. In this model, marital assets are given to the most deserving spouse, attempting to be more fair than equal.

Therefore, the bulk of the debt will likely go to the most “deserving” spouse.

Dividing Debt Equitably

In an equitable property division, courts look at the contributor to or user of the property. For instance, say a wife buys her husband a motorcycle for Christmas. She paid for it, and the bike is considered marital property. However, beyond the money she paid, she had nothing more to do with it. She didn’t keep it maintained; she never rode it; she didn’t clean it or fill it with gas. The bike, for all intents and purposes, is not “hers,” and the husband will most likely keep it after the divorce.

The same principles apply to debt. Here are some factors that influence equitable debt division:

Who Is Most Responsible for the Debt?

Although the debt is technically owned by both spouses, the court will be interested in who contributed to it most. If one spouse had a history of frivolous spending, they may be forced to take on the majority of the debt.

Why Does the Debt Exist?

The court also considers what caused the debt. Perhaps the breadwinner in the home racked up the debt, but they used that borrowed money on the house, kids, and so on. In that case, both spouses benefitted from the credit, and they may share the burden equally.

However, if one partner spent frivolously, accumulated debt, and the end products weren’t shared equally with the family, they could be accused of wasteful dissipation.

What Is the Timing of the Debt?

Did the debt build slowly and steadily, the way it does for most people, or did it happen all at once? Questions like these matter, because the answers tell a story. Sudden, immediate spending looks suspicious, and spouses can use it as evidence for an allegation. They could make accusations of an affair, claiming the debt was used to fund the relationship. Timing can also be used in a wasteful dissipation claim.

Debt in a Wasteful Dissipation Claim

Wasteful dissipation is a formal accusation. It alleges that one spouse intentionally spent or hid money, attempting to keep the other from getting their fair share.

Above, we mentioned how the timing of the debt can be used in this claim. Imagine there is a sudden uptick in spending right around the time the marriage started crumbling. This could be an indicator that the spender was preparing for the divorce, wasting money to spite their spouse.

We also spoke about frivolous spending. A wasteful dissipation claim can also apply to spending within the marriage, not just as a sneaky divorce tactic. If one spouse secretively spent money on things like gambling, an affair, drugs, etc., they could be accused.

If the court finds that a spouse is guilty of wasteful dissipation, it can rule that this spouse should take most or all of the debt. In this way, the divorce court mirrors a civil court. It punishes one spouse financially for their behavior.

Debt as Separate Property

Separate property is owned by only one spouse. Generally, this includes gifts from people other than the spouse, inherited property, and anything they owned before the marriage. If one spouse came into the marriage with debt, that is separate property. Most likely, they will be responsible for that debt after the marriage ends.

If you’re concerned about debt in your divorce, contact our firm for help. We work hard to make sure our clients are treated fairly by the courts. Call us today at (347) 378-1170, or reach out online.