Guidance On A Trilogy Of Debt-Related Questions In The Context Of A Wisconsin Divorce
This article aims to inform the reader as to the following:
1)AM I RESPONSIBLE FOR MY SPOUSE’S CREDIT CARD BILLS IN THE CONTEXT OF AN ONGOING WISCONSIN DIVORCE? 2) HOW SHOULD DEBT ALLOCATION BE WORDED IN A MARITAL SETTLEMENT AGREEMENT AND/OR DIVORCE JUDGMENT? 3)HOW WILL THE DEBT PROVISION IN YOUR FINAL JUDGMENT BE INTERPRETED BY THE CREDITOR(S) AND/OR THE COURT POST-JUDGMENT?
Wisconsin is a community property state. As such, all marital debt is the equal responsibility of both parties. Any creditor can potentially pursue reimbursement from either spouse either through a garnishment or attaching marital assets. One method of protecting yourself from the debts of your spouse is to file for divorce or legal separation. Either via mutual agreement or a contested trial, the Wisconsin court ultimately divide and allocate responsibility for the debt which exists at the time of the judgment. After a divorce or legal separation is granted, you are no longer responsible for the debts assigned to your former spouse within the context of the divorce action; your divorce judgment is not binding on third-party creditors, which will be discussed later on in this article.
In the context of a divorce or legal separation, all property and debt is presumed to be equally divided at the time of the judgment in Wisconsin. But, what if one spouse is responsible for incurring more of the debt, such as credit card bills? What if you didn’t even know about those credit cards? Many people ask in that situation, do I have to pay my spouse’s credit cards in a divorce in Wisconsin? We often see a situation where there is a large amount of credit card debt or business debt of which one spouse was unaware. However, there are different explanations for this. Sometimes, a person is irresponsible or has a spending addiction. On the other hand, there are situations where one spouse controls the money and refuses to give the other spouse money which leads to having to use credit cards just to buy the basic necessities.
The court will look at the factual details of your case when deciding whether the presumption of an equal division of debt should apply. If the debt is generally for “marital purposes” such as clothing, food, gas, etc., then the court will still generally order that credit card debt to be equally divided. On this issue, Wisconsin courts have ruled that a marriage is a partnership. In many marriages, spouses often disagree about certain issues. Spending is one of them. Some people are savers and some are spenders. Even though you may not have always agreed during your marriage that your spouse should have been using the credit cards or charged more than you thought was appropriate, does not mean that you are not responsible for that debt upon divorce. However, if the credit card debt resulted from what is called “marital waste”, then the court may deviate from that equal presumption. Marital waste is defined as dissipation of marital assets for a non-marital purpose. This could be spending related to gambling, drugs and alcohol or even related to an affair. In these situations, the non-incurring spouse will most likely not be held responsible for that debt. There are situations which do not fall neatly into one of these two categories (marital waste v. non-marital waste). In those contested cases, the court will have to take a close look at all of the facts and circumstances when making a decision as it is required to consider a result which is fair and equitable to both parties.
What if your ex-spouse doesn’t pay the debts he or she was ordered to pay in a divorce? Or, what happens if he or she files bankruptcy? Do you have to pay those debts?
Chances are you had some debt when you were divorced such as credit cards, mortgage, etc. And, most, if not all, of these debts were likely to have been considered joint debts in the community property state of Wisconsin. Your divorce judgment should have allocated these debts and ordered one spouse or the other to pay them. However, the thing you need to keep in mind is that your divorce judgment is only binding on the two of you – not your creditors. Your creditors were not a party in your divorce. Therefore, they don’t have to follow the court’s orders in your divorce judgment. If your ex-spouse fails to pay debts he or she were ordered to pay, the creditor can still come after you for repayment. Or, if your spouse files bankruptcy, you are still responsible for these debts as long as your name is still on them. If you live in a community property state, such as Wisconsin, you could even be responsible if your name is not on the debt although that doesn’t often happen. You do have some options, however, to force your spouse to pay these debts.
While you should seek the advice of an attorney to make sure you are as protected as you can be, it is important that your divorce judgment should at least have language included which sets forth your spouse’s obligation to pay or refinance any debt which has your name on it and to not incur additional debt in your name. It should state that you are “held harmless” from any of these debts. And, there should be language that states that if you are held liable for any of his or her debts, that you have the right to come back to divorce court to seek reimbursement. There are also additional provisions which can be included to even further protect you, including but not limited to language imposing hard deadlines regarding refinancing any particular debt in the sole name of the person being assigned said debt in the divorce judgment. Many of the standard forms for final Agreements that are available to people who do not have lawyers (commonly referred to as “pro se” forms) do not have this extra language contained in them.
Even in the event of a bankruptcy, the above-noted additional language can protect you. A bankruptcy action discharges the debt and responsibility between your spouse and the creditor. However, your spouse still has a responsibility to you to pay the debts he or she was ordered to pay in your divorce. Therefore, the divorce court retains jurisdiction to enforce that obligation if your judgment of divorce grants that authority to the court. The court has several options available to it providing that the proper language exists in the judgment. Primarily, the court can hold the violating party in contempt of court, and order repayment through garnishment or direct reimbursement by a date certain; the court can even order maintenance or alimony to compensate you for any debt you may end up getting stuck with if your ex- fails to pay. Sometimes the court will even order a lien or the sale of an asset to pay the debt.
If you are concerned about the payment of debts, you should definitely consult with an attorney to make sure the proper language is contained in your divorce judgment to protect you in the event your spouse fails to pay or files bankruptcy. Even if you feel you cannot afford an attorney, the long term cost to you could be much greater if you get stuck paying debts that your spouse is ordered to pay.
For more information, please contact us at (608)782-1469 to schedule an office consultation.