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INDIVIDUAL AND MARITAL DEBTS
© 1999 National Legal Research Group, Inc.
DISTRICT OF COLUMBIA: Bernard v. Bernard, 730 A.2d 663 (D.C. 1999).
The trial court's failure to mention the husband's substantial individual tax liability required remand for consideration of what effect the debt should have on the distribution of marital property and debts.
NEW YORK: Bogdan v. Bogdan, ___ A.D.2d ___, 688 N.Y.S.2d 255 (1999).
The parties should be required to share equally the marital debt.
These cases emphasize the importance of dealing with both individual and marital debts as part of equitable distribution.
In Bernard v. Bernard, the trial court's equitable distribution order did not mention the husband's individual tax obligations totaling some $40,000 incurred between 1993 and 1995. The husband's financial statements submitted to the trial court attested to that approximate amount, and the wife did not dispute either the fact of his tax obligation or the amount.
The District of Columbia Court of Appeals held that remand was required for the trial court to consider the husband's tax obligations and what effect, if any, they should have on the distribution of marital assets and debts.
A party's debts are a factor enumerated in the equitable distribution statute and are relevant to the court's allocation of the property and marital debts, the court declared. Given the size of the husband's individual tax liability, "we do not think the judge could properly ignore it in assessing the husband's ability both to maintain himself and to meet the obligations imposed by the distribution and award of alimony," the court declared. 730 A.2d at 665.
The trial court would not necessarily have to modify the distribution on remand, the court noted. For example, the court commented, the judge might find that the husband's earning potential made the debt comparatively less significant, and the judge could consider the reasons that the husband incurred a personal debt jeopardizing his ability to meet other obligations. The judge could also insist on better documentation of the tax liability, the court said. "We require only that the judge consider the factor expressly, explaining how." Id. at 666.
In Bogdan v. Bogdan, the parties stipulated on the record to a marital debt of almost $14,000, yet the trial court's judgment did not mention the debt. The wife appealed, claiming that one-half of the responsibility for the debt should be allocated to the husband.
The New York appeals court agreed and modified the judgment to require the husband to reimburse the wife for one-half of the stipulated amount of the debt. "It is well settled that expenses incurred prior to the commencement of a divorce action constitute marital debt and should be equally shared between the parties," the court declared. 688 N.Y.S.2d at 256.
The court noted that at a hearing the parties stipulated to various amounts of marital debt. Under the circumstances of the case, the debt should have been shared equally, the court said. Since the wife paid the husband's share of the marital debt, the husband would be required to reimburse her for that amount, the court declared. Furthermore, the court added, each spouse would be required to pay an equal share of a debt still owed to state tax authorities.
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