SCOTUS Bankruptcy Ruling Will Absolutely Affect People Getting Divorced
A recent case was heard by the Supreme Court in February 2023 involving a woman who tried to use bankruptcy protections to avoid paying her partner’s debts. The Supreme Court ultimately ruled that bankruptcy filers are still responsible for paying for debt incurred by their partners and cannot use this as a form of protection to get out of paying.
The case involved a California woman who owed over $200,000 in debt. This debt accumulated due to her partner being involved in various fraudulent schemes. Even though the woman was unaware of her husband’s fraudulent behaviors, the court still required her to pay this large amount of debt. However, the woman thought that if she filed for bankruptcy, she would be protected from paying.
In a 9-0 decision, the Supreme Court ruled that an innocent party cannot shield themselves from debt for another individual’s fraud by filing for bankruptcy. While the debt was originally $200,000 several years ago, it has since increased to over $1 million due to interest and continues to gain 10% in interest every year.
How does this case affect people getting divorced in Charlotte?
Overall, this case shows the seriousness of getting married and being responsible for your partner’s debt. As a matter of fact, in North Carolina, marital debt is any debt that is incurred after you get married and before you separate. Therefore, if one or both spouses spend money on anything or incur any debt during their marriage, it is considered to be the responsibility of both spouses.
The different types of debt that may accumulate in a marriage can include credit card debt, student loans, business loans, mortgages, and more. Regardless of whether you know about these debts incurred by your spouse, you are typically responsible for them, as you are married.
How can a lawyer help you divide marital debt?
Most North Carolinians know that the state does not allow for divorces until spouses are separated for at least one year. Separation means that you and your spouse are living in separate homes and do not plan to get back together. Once you are legally separated, you can begin working with a Charlotte divorce lawyer to determine the ways you can divide your marital debt.
During this process, a Charlotte divorce attorney from Epperson Law Group, PLLC will sit down with you and your spouse to find out what types of debts you both have incurred throughout the years of your marriage. This may shed light on any possible debts that you were not aware of. After the lawyer identifies all forms of debt between the both of you, you can begin discussing how you would like to divide your marital debt. Everything that you mention will be written in a separation agreement that you and your partner will sign.
Will all debts be split 50/50?
Most courts do prefer to split everything 50/50 when it comes to marital debt cases. However, there are a few factors that can play a role in determining the division of marital debt, including:
- How long you have been married
- The amount of income, property, debt, and liabilities you and your spouse have
- The health and age of you and your spouse
- How much contribution was given by spouses to career and education
- How much contribution was made to debt or property
- Tax consequences
- Who has custody of the children
Is it possible for debt to be considered separate?
Unfortunately, it is not possible for debt to be considered separate if you are/were in a marriage. The only way that debt is considered separate is if it is incurred after the date of separation. For example, if your partner made purchases with a credit card after the date of separation, you are not responsible for the balance owed on the credit card after that date. However, you are responsible for any of the balance that was made before the date of separation.
Am I responsible for my spouse’s debt if they pass away?
If a spouse passes away and leaves behind unpaid debt, it may be covered by property or money left in the estate. However, if there is no estate or not enough money left, you may be responsible. This will depend on different factors, such as:
- You were a joint account owner
- Credit cards are in both of your names
- You cosigned on a loan
It is important that you send in the required paperwork and a death certificate to the businesses and companies that your spouse owed money to. If you do not do this, they will not know that he or she has passed away.
How can I find out if my spouse has debt that I do not know about?
Although no one likes to believe that their spouse had any secrets when they were together, sometimes people open accounts without telling their significant other. In order to find out if your spouse has any debts that you do not know about, it is highly recommended to request a credit report. This type of report will tell you every active or closed account that has been in your or your spouse’s name throughout the years. You may even be able to see when each account was opened and the payment history.
While it can be nerve-racking and disappointing to find out that your spouse has secret debt, a lawyer from Epperson Law Group, PLLC will help you determine if you are responsible for paying this debt. If you are found responsible, there may be specific protections or ways that we can help make this easier for you. If you are ready to begin discussing this serious matter, please call our office or complete our contact form to schedule an appointment. We have offices in Charlotte, Weddington, Boone, and Concord.
Steven B. Ockerman is a graduate of the U.S. Naval Academy and Washington University School of Law. He has practiced law for over 25 years, concentrating on family law matters for over 16 years, and is a Board Certified Specialist in Family Law since 2009.
Find out more about Steven B. Ockerman