The Big, Bad D's: Debts and Death in Divorce-part I
| Publication year | 1996 |
| Pages | 57 |
| Citation | Vol. 25 No. 7 Pg. 57 |
1996, July, Pg. 57. The Big, Bad D's: Debts and Death in Divorce-Part I
In the perfect world, divorce clients would have no debts. Their substantial assets would be largely liquid and easily divisible. They would be employed in interesting, well-paid career positions so that spousal maintenance would never be necessary. They would have two lovely children, whom they would raise in an amicable joint custody arrangement, with reasonable child support modified annually by mutual written agreement. After graduating in the top 10 percent of their high school graduating class, the children would attend four years of an affordably priced college, for which the clients would gladly pay. Enforcement would never be a problem because both parties would be so law-abiding. Neither party would ever marry an evil stepperson or suffer illness, injury, unemployment, disastrous financial reverses or untimely death.
In Real Life, of course, practitioners will see "None of the Above." Divorce clients will have so many debts, they will not remember them all. The assets will be mortgaged, leveraged, uninsured and in need of maintenance and repair; their division will trigger hideous unforeseen tax consequences. Real clients will be so depressed by the divorce that they will lose their jobs and fight bitterly over support issues. If support payments are occasionally made, it will be with bags of Canadian pennies or rubber checks. All their bookkeeping will be inaccurate. Their children will either "self-emancipate" by running away from home or demand an education in Pediatric Neurology at Harvard Medical School, triggering endless arguments over child support followed by a sequence of verbal modifications that both parties will misremember.
They will execute new wills leaving everything to their new "spousal equivalents," and just when it all seems to be straightened out, the client's ex-spouse will die the day after his life insurance lapses and the day before the final closing on the sale of the family business. Murphy's Law of Divorce is that everything that can possibly go wrong will go twice as wrong as you ever thought possible.
Part I of this two-part article offers assistance in dealing with issues of marital debt. Part II, to be published in the September issue, deals with issues of death.
The concept of "marital debt" seems to be an unwanted stepchild of the law of dissolution of marriage. The Colorado version of the Uniform Dissolution of Marriage Act barely even mentions debt, apparently presuming that it will fall neatly into the "property settlement."(fn1) The Colorado Child Support Guidelines,(fn2) which are based on gross income, largely disregard the parental debt load.
Even where the marital assets are themselves collateral for large joint debts, the courts almost always adhere to the doctrine of complete division of marital assets despite the risks to the "non-owner but still debtor" spouse.(fn3) To be fair to the courts, there may be little alternative, since full payment of all marital debts would often mean liquidation of the entire marital estate.
For the individuals undergoing divorce, however, a straightforward division of assets without adequate regard to debt may be an uncomfortable thought. They may have many legitimate concerns. What if she misses the house payments? What if he forgets the car insurance and totals the collateral? If the responsible party fails to pay, what happens to the other spouse's credit rating? Will a collection agency harass him? Can he or she be sued? How can the irresponsible spouse be forced to repair the damage? The first task is to determine what the debts are and to educate the client about them.
If debt is not defined for the client, the debts may be discovered too late, with explanations like, "That's not a debt, it's a car loan," or "I know I co-signed it...
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