Debt, Credit Cards and Divorce – Who Will Be Responsible for Paying the Marital Debt?

Rhode Island does not have a specific statute directly related to the assignment of marital debt in a Rhode Island divorce. Theoretically, marital debt issues are determined under RI Equitable Division Statute RIGL 15-5-16.1. If the matter goes to a full trial on the merits, which is unlikely, the judge must rely on the 15-5-16.1 equitable division statute to determine the assignment of assets and debts. Contact a Rhode Island divorce attorney/attorney about your Rhode Island divorce case. Any debt incurred by husband and wife during the course of the marriage constitutes marital debt. Debt incurred before the marriage is the responsibility of the person who incurred the debt.

How is marital debt actually divided in Rhode Island divorce? That is a very difficult and complicated question. There is no clear answer. The answer can only be determined by analytical reasoning. In practice, the parties often negotiate the assignment of marital debt during the course of the divorce without the need for a trial. This article should be used for informational purposes only and not as a substitute for obtaining a Rhode Island divorce attorney. Judges tend to consider the following factors when determining the assignment of marital debt:

1) The court analyzes whether the debt was incurred in compliance with the Marital Partnership. Marriage is a partnership. If the debt was used for household items, groceries, clothing, family vacations, medical bills, etc. then the Court is more likely to divide the debt equally between the parties.

If the debt was incurred by the husband or wife in pursuance of their own agenda, the debt is more likely to be assigned to the person who incurred the debt. For example, gambling debt, debt used to further an affair, or unreasonable debt incurred without the consent of the other spouse is more likely to be assigned to the person who incurred the debt. This type of debt is theoretically “spousal debt” even though it is unfair that the other spouse has to pay it. For example, the gambling debt must be paid by the spouse who lost the money at the casino.

2) Who will have the title and/or possession of the goods or things for which the debt was contracted? This is a significant factor. If the husband bought a flat screen TV on her Mastercard and he will get the flat screen, then that debt is more likely to be assigned to him.

The person to whom the vehicle/boat is assigned will normally be responsible for the debt guaranteeing the automobile/car/boat. When it comes to real estate, the person to whom the real estate is assigned will typically be responsible for paying the mortgage, taxes, and insurance on the property. This can be further complicated if a home equity line of credit was used to purchase an asset that will be titled in the name of the spouse to whom the real estate is not assigned.

3.) What is the earning capacity, assets and ability of the parties to pay the debt? If one spouse has significantly higher future income or earning capacity than the other spouse, then that spouse may be ordered to pay a larger portion of the marital debt. This is a very practical determination since it makes no sense to assign a debt to a person who cannot pay it. Sometimes neither party can afford to pay the debt.

In some cases, the parties decide to file a Joint Bankruptcy Petition. In some Rhode Island divorce cases, one spouse files for bankruptcy and the other does not. The effect of Bankruptcy on court orders and obligations in the estate settlement agreement is beyond the scope of this article.

There may also be a foreclosure of the marital real estate or the parties may agree to a short sale. Foreclosures and short sales are also outside the scope of this article. Consult with a Rhode Island family law attorney or RI bankruptcy attorney about these issues.

4.) Who is to blame for the breakdown of the marriage? If one of the spouses had an affair, abused alcohol or drugs, or was physically abusive, then that spouse may be ordered to pay more of the debt. Cheating on your spouse could carry a penalty of being responsible for more of the marital debt

5.) Is the debt in the name of the husband or wife or is it a joint debt? This is a very practical determination. Judges are more likely to assign a certain debt to a spouse who is the “debtor.” (On behalf of that person) The justification for this is simple. The Debtor has an independent legal obligation to pay the third party creditor.

If both parties have the same amount of marital debt in their name, then the easy answer may be to assign each party the debt in their own name. If one spouse has a disproportionate amount of debt in his or her own name, the court may order one party to make periodic payments of the debt to the other party. The court could also order the sale of certain assets and the payment of the debt.

Joint debt is an even more perplexing topic. Joint debt means debt that both spouses owe the debt to a third party creditor. These are usually credit card debt, real estate mortgages, vehicle debt, store credit cards. If the court assigns a joint debt to one spouse, the other spouse must be vigilant to make sure the debt is paid on time.

Although the Rhode Island Family Court may assign joint debt, this assignment has some effect on either spouse’s legal obligation to pay the debt to the third-party creditor. Credit card companies like Mastercard, Visa, Chase, Wells Fargo, and American Express don’t care what a state family court judge orders. The only thing that matters to them is if they get their money back with interest. The person who signs a promissory note or debt contract is liable for that debt to the third party creditor. This obligation is independent of any Rhode Island (RI) Family Court order or Estate Settlement Agreement.

If one spouse is assigned a certain debt and misses payments or fails to make payments on time, that behavior can wreak havoc on the credit ratings of the other spouses. This is especially the case if failure to pay the debt results in foreclosure, lawsuits, or car repossession. If the payments are not made in accordance with a court order or estate settlement agreement, then the other spouse may seek relief in court with a motion for contempt or a motion to enforce the estate settlement agreement.

It makes little or no sense to assign the debt to a spouse who has no income or ability to pay the debt because the assignment will actually harm the other spouse because their credit may be severely affected. Rhode Island Attorneys Legal Notice under the RI Rules of Professional Responsibility:

The Rhode Island Supreme Court licenses all attorneys in the general practice of law, but does not license or certify any attorney as an expert or specialist in any field of practice.