Division of spouses’ debts during divorce

Division of spouses’ debts during divorce

Marital debts are defined as encumbrances incurred by one or both men during the marriage and taken to provide for the needs of the family. The very concept of funds borrowed for the benefit of the family is key to the definition.

• The division of property encumbered by debt and the obligation itself occurs in accordance with the awarded shares. According to the Family Code of Ukraine (Family Code) of Ukraine, the debt itself is divided proportionally to the property received by each man.
• Cases on the division of debt obligations have recently been considered in courts no less often than on the division of property. This has become relevant in modern conditions after the spread of loans not only for real estate or cars, but also for less significant things (rest, household needs, repairs).
• Spouses’ debts appear not only because of credit obligations, but also in other cases. For example, due to harm caused to a third party, debt for utilities, installments in stores or purchases on credit cards.

The division of debts is carried out not only during the divorce procedure, but also after it. It is possible even without the termination of a legal marriage. 

Family lawyer

Skryabina Darya Sergeevna

Candidate of Law

Hello! In this article I will talk about the division of spouses' debts during divorce, common debts (loans) of spouses during the division of property, the debts of one of the spouses during the division of property, divorce, the division of bank loans during divorce, the division of property.

Common debts (loans) of spouses during division of property

Common debts, as well as property acquired jointly during marriage, are divided between spouses equally or in another proportion by agreement of the parties or by court decision. It is necessary to separate common marital debts from the obligations of one of the couples.

1. Common debts include, for example, a mortgage on an apartment, funds for children’s education, the purchase of household appliances for the home, a loan for a joint vacation or organizing a wedding.
2. Common debt obligations and loans are considered to be those where both parties act as borrowers or where one of them is a guarantor.
3. Sometimes a husband or wife has sole claim to any property encumbered by a debt obligation. In this case, the wife will have to be independently liable for the debt encumbrance of the thing, part of the real estate or other property. The other party can either claim this property or part of it, or refuse any encroachment.

Debts of one of the spouses during division of property, divorce

If the loan is issued to one of the spouses (especially if one of the spouses did not give written consent to the debt obligation or does not know about it at all), then after the divorce such debt will be considered to belong to only one debtor (Family Code of Ukraine). The latter will pay the remaining funds.

• The above will only be relevant if the funds received by the man were not spent on general family needs. Such debts are often the subject of disputes in court.
• The second spouse will have to prove that the debt that arose during family life belongs personally to one of the spouses. Arguments may include the lack of need in the family for the thing taken on credit, spending money on gifts to third parties, which does not benefit the family in any way.

It happens that family life actually ends long before the divorce. Debts acquired after this moment can be recognized as belonging to one of the spouses.

Fictitious debt in the division of property of spouses during divorce

Often, in order to increase his share in the common property, an unscrupulous man resorts to using fictitious debt. He takes out a loan on his own (often in collusion with the creditor, indicating a backdated date) and claims that the funds were spent for the benefit of the family. If such a debt is recognized in court as common, the share of the funds of the other half is, as it were, diluted, and the interested party can sue for a certain amount. There are several ways to combat this type of fraud.

1. The court should be required to critically assess the debt. For example, insist on an expert assessment of the statute of limitations if there is a suspicion of the erroneous debt being issued retroactively.
2. The judges should be drawn to the gratuitous nature of the loan, the absence of demands for repayment, or the friendly relations between the creditor and the debtor.
3. Alternatively, the creditworthiness of the person who provided the loan can be questioned on the basis of low income.
4. It is necessary to insist on a financial analysis of the family’s well-being. If it has not improved after receiving a fictitious loan, there are reasons to doubt the very fact of receiving it.

Methods of dividing debts during division of property, divorce

As with the distribution of property, there are two legal in form and content, but different in implementation, ways of distributing debts. If normal relations are maintained between spouses, they can agree on each person’s contribution to the payment of debts and draw up an agreement on this (Family Code of Ukraine). In case of disputes and mutual claims, it is reasonable to go to court (Family Code of Ukraine).

• It is possible to determine which debts are common and which are personal by means of a voluntary agreement between legal or former spouses. This is the best option for distributing debts. With a healthy approach, it allows you to save time, nerves and money on lawyers.
• The agreement document may not be registered with a notary, and it will have legal force. Although, if desired, you can apply for notarization.
• A marriage contract can be used as a document regulating the division of debts. It can be concluded at any time during married life.
• A court hearing of marital debts for their division can take place not only at the initiative of one of the couple, but also at the request of the organization that issued the loan.
• When dividing debt through the court, a bank representative is invited to the hearing using a subpoena.

Division of bank loans during divorce, division of property

The credit institution is interested in the debt (especially if it is large) being paid in full. If there are two co-payers in the form of former spouses, this is much easier to achieve than if the debt is divided into two parts. After all, in the first case, at the right moment, the bank can demand the return of the loan money from either of the two.

1. Since banks want to see spouses as borrowers when issuing a mortgage, the debt and the mortgaged property itself are divided between them after a divorce. The problem is that it is almost impossible to sell the property until the debt is repaid.
2. A court decision on the distribution of debts during a divorce does not always result in the division of the debt in the bank that the plaintiff requires. The opinion of a representative of a financial institution can influence the judge’s decision.
3. When concluding a loan agreement, in order to reduce risks, the bank has the right to demand that one of the spouses act as the payer, and the other as the guarantor. A condition may be included in the document that in the event of a divorce, the terms are not subject to change. Even a court cannot terminate such an agreement.
4. On the other hand, in order to ensure the interests of the bank, its representative may demand in court that the debt be paid by the one of the couple who is indicated as the payer.
5. The division of debts through a transaction is not an order for the bank to divide the credit obligations between the spouses.

If there is an agreement, the husband or wife may try to re-register the joint liability agreement to one of them. Usually, the one paying the remaining debt receives ownership of the loan object.

Statement of claim for division of debts during divorce of spouses

A claim for the division of debts is filed by an interested party. It is understood as the presentation of claims in court that reflect the legal rights of the plaintiff. The statement of claim lists the debts that, in the opinion of the plaintiff, are subject to division and the desired method of their distribution. It is in the interests of the plaintiff to indicate only those debts that he considers universal. Before filing the claim, it is necessary to take care of the documentary evidence base and witness testimony.

• A claim for the division of debts may be filed together with a divorce application or separately from it.
• A decision may be made by a counterclaim, in which he will set out his vision of the situation and his list of demands.
• When applying to a government agency, a citizen is obliged to pay a fee. A claim for the division of debts is imposed on an administrative fee, including. Its amount is determined depending on the total amount of the claim – that is, the amount of debt that is supposed to be divided. Customs duty is calculated in accordance with the Law of Ukraine On Court Fees. It can range from UAH 200 to UAH 20,000.

Judicial practice of dividing debts during divorce

There is not enough judicial practice in the distribution of marital debts to form any general conclusions. In each individual case, the court makes a decision by appealing to the principles of legality.

1. Often, as a result of the trial, former spouses are awarded joint payment of the debt without dividing it into its constituent parts.
2. When applying to the court, the interested party must collect evidence depending on how it wants to divide the loan. That is, prove either that the money was spent on the needs of the family, or in the interests of only the borrower.
3. When dividing common debts, the court must observe the principle of proportionality of shares (Family Code of Ukraine). In practice, this thesis is often deviated from, taking into account the interests of minor children of the couple or one of the spouses (Family Code of Ukraine).

Due to the increase in cases of fictitious debts, judges are cautious about recognizing debts as common.

Division of common debts of spouses during divorce

• The spouses’ debts can be recognized as common or personal, belonging to one of them.
• Common debt is understood as debt that was formed during family life and was created to increase the family’s well-being.
• Debts can be divided by agreement or court decision.
• A bank that has issued a large sum of credit or provided a mortgage, in its own interests and within the framework of the law, has the right to stipulate special conditions in the contract and demand that its interests be observed when dividing debts.
• To divide debt through the court, you need to file a lawsuit. The opponent has the right to file a counterclaim.
• Judicial practice on the division of debts has not yet been fully established. Judges approach each case carefully and individually, especially given the prevalence of fictitious debts.

Lawyer’s Answers on Dividing Debts in Divorce

Family lawyer

Alexey Nikolaevich Skryabin

Doctor of Law

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