I’ve previously explained how Tennessee courts will divide marital assets during a divorce, and I clarified how the court will divide property that was purchased after the parties separate, but before their divorce was final. That’s great, but what about debt? With the economy the way it is, many couples have a significant amount of debt that will need to be divided as part of the divorce. How do you know who should take on all those payments?
Tennessee statutes do not define any difference between marital and separate debt, nor do the statutes offer any advice about separating the debts a married couple may have accumulated during the marriage. Fortunately, in 2003 the Tennessee Supreme Court clarified this for us in the case Alford v. Alford.
Marital debt defined
As far as a definition of marital debt, the Court made it easy for us. The court said “‘marital debt'” are all debts incurred by either or both spouses during the course of the marriage up to the date of the final divorce hearing.” Notice that this is similar to the definition of “marital assets”, meaning that all of the assets and debts acquired by one or both parties at any time during the marriage will be considered to belong to both parties, and should be split as part of the divorce.
I should also point out that in the Alford case, the parties had been living apart (but not legally separated) for nearly 10 years before the divorce. Much of the debt was acquired during that time. The fact that they were living apart makes no difference, as the trial court noted: “[t]hey cannot be both married and divorced. Courts should not concern themselves with the type of living arrangements chosen by adult parties to the union.” Don’t be fooled into thinking that living apart from your spouse has a significant affect on how your property and debts will be divided. Together or separate, it makes no difference.
Division of marital debt
While the debts are defined in a way that’s similar to the assets, the courts are instructed to use a different analysis when dividing the debts. Assets are divided by considering numerous factors related to the needs and abilities of the parties. Debts, on the other hand, are divided using a simpler analysis. The Supreme Court instructs us to divide debts considering the following four factors:
- The debt’s purpose;
- Which party incurred the debt;
- Which party benefitted from incurring the debt; and
- Which party is best able to repay the debt
In order to have accurate information regarding each of these four factors, it may be necessary to perform discovery, or even use alternate methods to find out why this debt exists. Once all of this is known, the debt can be divided appropriately.
What you need to know
This sounds simple enough, but it can be complicated in some situations. If the amount of debt, or where it came from, is an issue in your divorce you would benefit from the the advice and guidance of an attorney. Call me to find out how I can help you.