Legal Question in Family Law in Maryland
Treatment of loans and debt in division of divorce assets
My wife and I separated in June 2004, no separation agreement exists, and she filed for divorce in Dec. 2005. We are currently in divorce mediation. Since establishing her own household in June 2004, she has run up $75,000 in debt, including $50,000 borrowed this year from her 401k (which was established during our marriage). The rules governing her 401k prevent her from cashing it out. She has also claims to have borrowed money from her Dad, which she lists as a loan. All of this debt she seeks to seeks to subtract from the marital assets, thereby effectively making me pay for half her debt. She makes $110,000, and I have been paying for half of the child care costs. I make $45,000, and have no debt other than our mortgage (I still live in the house, and pay the entire mortgage). 1) What are the rules pertaining to debt in the division of marital assets? 2) What relevance does the fact that the debt was accumulated since the separation have? 3) Can she get away with what she is trying to do? 4) As a last resolt, can I do to her what she is trying to do to me?
2 Answers from Attorneys
Re: Treatment of loans and debt in division of divorce assets
These are all issues which compel the question:
Where is your lawyer in all of this? Don't have one? Then, yes, she (meaning your wife) "may well get away with it" unless your issues are properly and effectively advocated by experienced counsel (and hers concomitantly derogated)in whatever forum is designated to hear them.
Re: Treatment of loans and debt in division of divorce assets
Post separation debt is only shared by the non-debt-ridden spouse if the debt-ridden spouse can prove that the expenses were "marital". "Marital expenses while you live together are almost everything, post separation "marital expenses" have to relate to a debt of the marriage. For instance if the debt was incurred for hospital bills for your common child, the likelihood is that it will come out of the marital estate. If they wre incurred to buy her a new car or for a new Fall wordrobe, it is not so likely. During the pendency of the divroce, she has had the ability to seek spousal support if she needed contribution for reasonable and necessary post separation expenses.
Since it sounds as if her expenses were unnecessary and not reasonable, it is unlikely that she will get the Court to order you share in the liability.
Her 401K is fine, she just has loans against them, which loans are not yours and you would still be entitled to 50% of the marital portion of those funds. Her 50% would be heavily indebted but yours should pass free. If her loans exceed her 50% share then the COurt may give you a disproportional share of another asset, such as the equity in a house.
Because this is my opinion, you don't need to contemplate any "do unto her as she has done unto you" scenarios.
Good luck.
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