Family Law Section Blog: Post-filing Debts in Divorce: When Are They Divisible Marital Debt?:

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  • Family Law Section Blog
    August
    20
    2019

    Post-filing Debts in Divorce: When Are They Divisible Marital Debt?

    David S. Kowalski

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    When should post-filing debts be considered when establishing a balancing payment in divorce? David Kowalski discusses issues raised by a recent case.

    Most temporary orders in divorce include a clause that debts incurred by a spouse after the filing are assigned to that spouse. The question, however, is not which spouse ultimately pays the debt but whether post-filing debts are considered when establishing a balancing payment.

    David Kowalski com david kowalskifamilylaw David Kowalski, Marquette 2007, is the founder of Kowalski Family Law LLC in Madison, where he concentrates his practice in family law.

    Gildersleeve v. Gildersleeve

    A recent case addressed this issue. In Gildersleeve v. Gildersleeve,1 the parties had such a temporary order, and the husband incurred two debts totaling about $45,000 afterward.

    There was no evidence of the purpose of these loans. The trial judge assigned the debts to husband, and included them in the calculation of the divisible estate. The Court of Appeals reversed, because the trial judge did not find when and for what purpose the husband incurred the debts before assigning them.

    The court’s reasoning is worth quoting:

    The issue is not merely whether [husband] failed to timely disclose these debts, but rather when and for what purpose [he] incurred these debts. If [he] incurred the debts after the temporary order was issued for an improper purpose—and [he] points to no evidence in the record that suggests otherwise—they were not properly included in the circuit court’s property division because they should have been [husband’]s sole responsibility, per the temporary order.2

    In two footnotes, the court added:

    We also note that, were we to accept his position, the practical effect would be to make a temporary order’s prohibition on parties incurring debt during the pendency of a divorce action meaningless … the purpose for which they were incurred is also important. For instance, if [husband] incurred these debts after the temporary order was issued for purely personal reasons (such as taking a vacation) the debts would be his sole responsibility. However, if he incurred the debts to pay a marital debt (such as a joint tax liability), then they would be properly considered in the property division.3

    This is rather extraordinary language, since no case law is cited for this sweeping ruling.

    It also may be inconsistent with statutory and case law. Per Wis. Stat. section 767. 61, all property and debt “subject to division includes all property of the parties acquired before or during the marriage, unless specifically exempted by statute” as gift or inheritance. … [A]ny language … suggesting that circuit courts have discretion to exempt property or debt from division upon divorce is both erroneous and non-binding.”4

    Waste of Assets

    Perhaps the Court of Appeals in Gildersleeve intended that post-filing debt incurred for an “improper purpose” should be assigned to only one spouse, under the theory of marital waste. Even if that were the intent, however, the trial court cannot ignore the debt. Instead, waste of assets can be considered as a “negative contribution” to marriage, as a factor to deviate from the presumption of equal property division.5

    Such debts cannot be ignored, or assigned outside of the property division, as the Gildersleeve decision seems to suggest, as one would do with a gifted asset.

    A New Standard?

    It is unclear if the court is suggesting a new standard for considering post-filing debts. Although Gildersleeve is unpublished, it can be used as persuasive authority. Therefore, it does not override Derr, etc., but there is certainly the opportunity for confusion.

    Endnotes

    1 19 WI APP 21.

    2 Id.at ¶ 30.

    3 Id.at ¶ 30, fn. 5 and 6.

    4 Derr v. Derr, 280 Wis. 2d 681, 716 (Ct. App. 2005). 

    5 Anstutz v. Anstutz, 110 Wis. 2d 10 (1982).





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