Tag: Marital Debt

Divorce and Financial Infidelity

Posted by Ron Kauffman on

One in five people in a relationship say their partner is financially irresponsible, and that they’re 10 times more likely to divorce for financial reasons, according to a new survey released from insurance comparison website Policygenius. Will running up excessive debts and other forms of financial infidelity be an issue in your divorce?

Divorce and financial infidelity

Financial Survey

The survey polled 2,005 adults in relationships and asked them questions like “What financial information do you and your partner know about each other?” and how they deal with money as a couple. The findings revealed that only 50% of people know their partner’s credit score, and yet 78% of those surveyed manage joint finances.

“If you’re at all doubtful about transparency, get a credit check. If they don’t give you permission to get a credit check, you’re in trouble. Know everything about your own finances, your mate’s finances and have a plan for how you’re going to work together to budget effectively and save for the future.”

The reality is that most couples openly commit financial infidelity: 12% of people in a relationship have hidden a purchase from their partner; another 20% say they’d spend $500 without telling their significant other and what’s worse, 16% said they don’t know anything about their partner’s money situation, according to the survey.

Florida Divorce Debts

I have written about divorce debts and other forms of financial infidelity before. In Florida, liabilities such as credit card debts – even if it happened without your knowledge – may be treated as any other kind of debt.

Generally, in divorce proceedings the court has to set apart to each spouse that spouse’s nonmarital assets and debts, and in distributing the marital assets and liabilities between spouses, courts have to begin with the premise that the distribution should be equal, unless there is a justification for an unequal distribution.

Some of the relevant factors for justifying an unequal distribution include the economic circumstances of the parties, the duration of the marriage and the intentional dissipation, waste, depletion, or destruction of marital assets after the filing of the petition or within 2 years prior to the filing of the petition.

A common complaint in divorce is that someone will steal or destroy assets once they learn that a divorce has been filed, or run up huge credit card bills. This could be found to be dissipation or waste.

Other forms of dissipation include:

  • Incurring major gambling losses;
  • Excessive spending on alcohol or drugs;
  • Conveying marital property to family members or friends below cost with the intent to reacquire the undervalued asset post-divorce;
  • Destroying big-ticket personal property; and
  • sustaining losses concerning a sham investment.

If a judge determines there was an intentional dissipation, waste, depletion, or destruction of marital assets, the court can divide the remaining marital property and credit or debit accordingly.

Husband and Wife Money Summits

Financial infidelity and fights about them are increasingly a pain point in relationships, particularly when one person is tight with money and the other spends more liberally. People are twice as likely to describe themselves as savers and their partners as spenders, according to separate data from SunTrust Bank.

Because of these woes, some couples are enrolling in financial therapy to get on the same page about finances. Money summits have sprouted up around the country to help couples talk about daily budgets, divvying up financial responsibilities, debt and financial goals, like saving up for a baby, a new home, retirement or for vacation.

There are little things couples can do every day to maintain a financially healthy relationship, whether it’s carving out hour-long money dates to talk openly about what you’ve spent that week and why, or to plan ahead for future expenses.

“Decide in advance how you will handle major purchase decisions together,” said Brittney Castro, a certified financial planner. “For example, some couples agree to discuss every purchase over a certain amount of money. Hurt feelings may arise from the surprise of an expenditure, rather than simply that the money was spent,”

The Fox Business article is here.

 

Chinese Property Division

Posted by Ron Kauffman on

China’s Supreme People’s Court just redefined what a marital debt is. Now, Chinese spouses will no longer be on the hook for unreasonable marital debts during the marriage as part of a divorce settlement.

The Supreme People’s Court, in a revision to Article 24, said that debts will be considered marital liabilities only if both partners sign the original paperwork, or if a non-signatory later approves the borrowing.

The change does not apply to spending or borrowing considered reasonable in a marriage, such as payments made for shelter or food, the court said.

Speaking at a press conference, Supreme Court judge Cheng Xinwen said the update to the article was intended to reflect a changing society.

It was considered necessary in view of the rising number of cases of people finding themselves in financial difficulty because of their spouses’ clandestine borrowing, he said.

Florida Property Division

I’ve written about property division in Florida many times before. Property division, or equitable distribution as it is called in Florida, is governed by statute and case law.

Generally, courts set apart to each spouse their nonmarital assets and debts, and then distribute the marital assets and debts between the parties. In dividing the marital assets and debts though, the court must begin with the premise that the distribution should be equal.

However, if there is a justification for an unequal distribution, the court must base the unequal distribution on certain factors, including: the contribution to the marriage by each spouse; the economic circumstances of the parties, the duration of the marriage, or any interrupting of personal careers or education.

Additionally, courts can consider the contribution of each spouse to the acquisition, enhancement, and production of income or the improvement of, or the incurring of liabilities to, both the marital assets and the nonmarital assets of the parties.

China’s Distribution Solution

The previous version of the Chinese law stated that all debts incurred in a marriage were the joint liability of both partners.

Many people in China are in favor of the new law because of the values behind it.

I see no point in drafting an article to protect a creditor’s interests, as a person who’s able to lend money is always in the dominant position and capable of demanding that both spouses sign the paperwork before lending them money.

There were cases where husbands had sought to cheat their partners by concocting fake loan agreements in collaboration with dubious associates who would then demand repayment from the unsuspecting and legally defenseless wife.

Judge Cheng said that the law was introduced to help maintain market order – and creditors only as a consequence – at a time when there was a growing number of cases of couples trying to evade their debts by faking a divorce.

The South China Morning Post article is here.

 

Marital Debt: The Divorce Minefield

Posted by admin on

On behalf of Ronald H. Kauffman, P.A. posted in Marital Debt on Thursday, July 12, 2012.

A lot could be said about divorce, but “easy” is not one of them. First there is the emotional trauma of ending a marriage, but that’s only the start of it. You also have to work out timesharing with the children, the property division of the marital assets and marital debts, paying child support (and possibly supporting your soon-to-be ex) paying for the process, and of course, taxes.

This is a short post about the hidden minefield of divorce: the dreaded marital debt.

Marital debt is a danger you may not be aware of until you’ve stepped into it. But, when you hire a lawyer and accountant to help, you ensure that you not only take on the debt you are legally obligated to pay, but learn which debts are the most advantageous to take – if given a choice. You also learn how your debt service impacts the property division, and the support you pay or receive.

If, as they say, “knowledge is power”, then in addition to your lawyer you should take the time to speak to an account or financial advisor to prepare for your divorce. This knowledge will help you take charge (pun intended) of your debt issues. You will then be prepared to work out a settlement, or learn what to request in court, with confidence. At my office we work with several accountants and financial advisors to help guide you through this minefield.