Sharing Debt in Divorce

Today’s economy is providing some hope for the future when it comes to financial security. Unfortunately, debt does not disappear on its own and for married couples, debt can be the focal point of a divorce. We know that sharing is important in marriage – but does that go for debt, too? Recent case law points to a separation of sharing debt when it comes to creditors, but it can be difficult to determine whose debt is whose.

A recent Superior Court case delved into the question of how each spouse’s debt is considered, addressing whether or not each individual’s judgments could be consolidated into one judgment. The Plaintiff bank wished to consolidate the judgments in order to make a claim to property that the spouses held together as tenants by the entireties. The intention was to combine the judgments so they could get property owned and titled by both.

Fortunately for the couple, the court ruled in accordance with case law that has been upheld for many decades, which indicates that creditors have to obtain a joint judgment against both spouses to pursue a jointly held property.

The specifics of the case involve a husband and wife who took out loans of over $6 million to renovate real estate properties. The bank then proceeded to obtain judgments individually against each spouse when they defaulted on the loan. Based upon several other facts including a guaranty agreement that was overlooked by the bank, the Superior Court upheld the trial court’s denial. When it comes to divorce, a spouse’s debt is considered individual pursuant to Pa. C.S. 3503 and is handled during equitable distribution.

For couples facing divorce, sharing debt or judgments can create confusion during equitable distribution. The entity that obtained judgment should have followed the correct procedure if attempting to execute on jointly owned property. A creditor may have failed to include a spouse in the action, for example. These matters should be reviewed closely if the marital home is pending sale as a result of the divorce and equitable distribution.

Handling these matters can be confusing and exhausting without a divorce lawyer that can also explain the details of other litigation or judgments. Only an experienced Bucks County divorce attorney can advise you on the best course of action and your rights.

Call the Law Offices of Michael Kuldiner, P.C. to schedule a consultation with a Doylestown divorce lawyer, at (215) 693-6191. Or complete the online inquiry form to have a member of our team contact you to schedule your appointment.