Debts Incurred After Separation

In many cases any new debts incurred by one of the spouses after a couple has decided to separate are considered to be the responsibility of both spouses. This is true in both community property states and common law states, but courts may make a different determination, depending on the circumstances of the debt.

Debt Liability Depends on the Nature of the Debt

In general, all debts incurred jointly to provide for marital expense or to benefit the children of the marriage continue to be the responsibility of both spouses even after separation. These include expenses for food, rent, mortgage, education, and certain bills such as utilities. Even if one spouse is wealthier than the other and the spouse with fewer resources runs up a large credit card debt to pay these expenses while separated, a court will usually consider these debts the responsibility of both spouses. 

In addition, if the separated spouses agree to take out a loan in both of their names, both spouses will continue to be liable for the debt even after a divorce is final.

Debts Incurred After Separation

However, debts incurred after separation that are not for marital expenses and are only in one spouse’s name are usually considered the debt of that spouse. This is true even if a creditor may have relied on joint marital assets to secure a loan or line of credit. This is intended to prevent one spouse from running up huge debts after separation and forcing the other spouse to accept liability since the debts were incurred before a divorce. 

If, for example, one spouse goes on a spending and gambling spree in Las Vegas and acquired huge debts, a court will most likely find that this debt is the sole responsibility of the spouse who incurred it, even if the spouse used marital assets (such as the family home) to secure the loan that paid for the spree.

Debt Liability Depends on the Nature of the Separation

Whether one or both spouses can be held liable for debts after separation can also depend on how a state recognizes separation. This generally has to do with the length or permanence of the separation and/or the intent and conduct of the spouses during this period. A few states allow a legal separation and will not recognize a separation for debt assignment purposes until the legal paperwork has been filed.

Other states recognize a separation when spouses are living separate and apart. This usually means more than just living in separate homes. Some states also require that at least one spouse does not intend to repair the marriage, and conduct during separation supports this intent.

This conduct element has been very important to some courts. For example, a husband and wife decide to separate and the husband moves out, but then moves into his girlfriend's house without telling his wife. He tells his girlfriend and his friends that he intends to file for divorce, but at the same time, he still spends some weekends and holidays at his own home and often has dinner with the family.

He also maintains to his wife that he wants to work on the marriage. During this time, the wife takes out a loan to buy an expensive sports car, using the marital assets to secure the car loan. The husband files for divorce a month later and asks the court to assign the debt of the sports car to the wife, even though the creditors relied on the marital assets when approving the loan.

Courts often decline such a request, even though the spouses were living separately and the husband intended to end the marriage, because his conduct with his wife did not reflect this intent. The court in this situation may find that the spouses were not living separate and apart, and assign the car debt to both parties since it was incurred before divorce.