By: LINDSEY O’NEILL, ESQ.
When a marriage fails, dividing the marital property is hard enough when the couple actually has assets to split. A divorce attorney colleague of mine recently pointed out that he’s seeing a trend in what’s called the “bankrupt marriage” – when the couple has more debt than it does assets. In a bankrupt marriage, or “negative asset” case, the question becomes: How to divide the debt between the ex spouses? Equally? Non-equally? Fairly?
Marital assets and debts are divided in accordance with state law. In ”community property” states, the general rule is that marital assets and debts are divided equally. In other states, the division of property is supposed to be made “equitably” based on a variety of factors. With the current economic crisis, though, courts may be taking a new look the rules regarding division of assets, particularly in states where the general rule is to split things down the middle. Couples owe more on their homes than they’re worth, credit card bills are often too high to pay even with two incomes, and salaries are being cut. For these reasons, and others, divorcing couples are having a hard time allocating debt between them. Rarely can each spouse take on an equal portion of the debt. If you’re in a bankrupt marriage – and you have more debts than assets – then your attorney may be able to argue for an unequal division of the debt in proportion to your ability to pay. Another option may to award an unequal division of the assets in order to offset certain financial discrepancies between you.
The financial aspects of any divorce can be complicated, but if you are in a “bankrupt marriage” contact an experienced divorce attorney to determine if the non-equal division of property and debt is available in your case.
If you’re in San Diego, you can certainly contact my attorney friend, Roy Doppelt, of the law firm of Pinkerton, Doppelt & Associates. He takes these kinds of cases regularly.
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Lindsey O'Neill is the Director of Legal Content and Strategic Development at LawInfo.com. Ms. O'Neill is a California licensed attorney based in La Jolla and experienced in a wide variety of legal and business matters.
I agree with your friend. In the past few years, my practice has changed from dividing property to dividing debt, managing the negative impact of foreclosure and working with bankruptcy attorneys to assure the appropriate sequencing of bankruptcy filing and divorce proceedings. Also, because post-divorce bankruptcy filings by one party often result in creditors going after the “non-bankrupt” x-spouse, a great deal of attention must be paid to how the debt is divided and to the appropriate use of “qualified domestic support” language in proposed judgments.
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