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Often, one of the first questions a client in a divorce case raises concerns the treatment of debt. “Am I responsible for my wife’s credit cards?” “The mortgage was on his house before I moved in. Am I responsible?” “It’s her car. Do I have to pay off her auto loan?” “He has a lot of student debt. Am I responsible for any of it?” All very good questions. Along with the division of marital assets and in the absence of a prenuptial agreement that covers the distribution of debt on divorce, Florida law outlines how the parties to a divorce are to divide their debts. This is one task in determining the net marital estate, that is, the present value of the marital assets to be distributed between the spouses less the current balances on all of the marital debts. This is called ‘equitable distribution’ and is the subject of Chapter 61.075, F.S., and many appellate cases over the years that have interpreted its provisions.

In very general terms, a court has three duties under this statute concerning marital debt: First, determine if the specific debt was incurred during the marriage or prior to the marriage. If created prior to the marriage, the debt is returned to the spouse that incurred the obligation. If the debt was incurred during the marriage, it is deemed a marital debt and is the subject of ‘equitable distribution’. Second, the court must determine the amount of the debt as of the date of the filing of the divorce case or the date of any settlement agreement addressing the debt. Finally, the court has to consider the applicability of a list of ten factors which might affect how the debt is distributed between the husband and wife. For example, if the court finds that a debt was improperly incurred within two years of the filing of the petition for divorce (what is referred to in case law as a ‘waste or dissipation of a marital asset’), such as for supporting an affair, to purchase illegal drugs and the like, the court may assign the totality of that part of the marital debt to the party at fault so long as the other spouse is truly innocent of the wrongdoing.

The statute makes clear that the name on the debt is irrelevant if the debt was incurred during the marriage and one spouse or the other (or both) are on the debt. For example, if a car loan and car title were taken solely in the name of the wife during the marriage, the debt and asset are both marital and the net value of the car (present value less present loan balance) will be equitably distributed along with the other assets and debts in the marital estate. The same applies to credit cards (a big area of contention!), student loans and other debt. The key is determining when the debt was incurred vis-a-vis the date of marriage.

One area of particular concern is Federal income tax liability. If the married couple knowingly failed to file a joint Federal income tax return (Form 1040) when due, both spouses can be held jointly and individually liable for taxes due plus interest and penalties. If one spouse can qualify for ‘innocent spouse’ protection, then it might be possible to avoid the delinquent spouse’s tax burden. Otherwise, both parties may be responsible.

There are many hundreds of cases interpreting and clarifying the provisions of ‘equitable distribution’. As you can see, ‘marital debt’ is a complex area and the consequences can be very significant in a divorce case. It is important that the advice of a competent and experienced family law attorney be secured to understand this area of the law.

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