Dallas Divorce Law Blog by Michelle O'Neil

The current economic crisis may be putting a strain on some couples.  According to the American Psychological Association, 83% of women and 78% of men are currently stressed out about money.  But what happens when one spouse lies to the other about money.  Take, for example, the Muniz couple interviewed on Good Morning America this morning.  When the wife was pregnant and due with their child, the husband changed insurance, resulting in no coverage for the wife and child at birth.  This caused the couple to incur significant medical bills for the hospital stay and some complications.

What is financial infidelity?  It is a subtle form of cheating — disloyalty to your spouse.  Many people think it is benign because you just leave out some information — like you bought a new dress and told your husband it was on sale when it really wasn’t.  Or, your spouse gets a credit card that you don’t know anything about and hides it, with the purchases, from you.  But, any lie can be damaging to the trust relationship in a marriage and can cause cracks in the foundation.

As a Dallas divorce lawyer, I see many couples who have issues of infidelity or lying about finances.  It is too common to see a wife who has zero information about the finances.  This causes such disparity in the divorce process.  The divorce lawyer for one spouse cannot get vital information from that spouse, so the information must come, unreliably, from the other spouse.  That can also raise the expense of the divorce because the other spouse may not be forthcoming in turning over the information.  This can leave the spouse without the information, usually the wife, in a vulnerable position, subject to the dictatorial demands in negotiations of the other spouse, usually the husband.

So, if you are married, encourage your spouse to be forthcoming about the finances.  If you find out that your spouse is withholding information or lying about the finances, carefully examine the relationship for other cracks in the foundation. 

If you are contemplating divorce in Dallas, Collin, Tarrant, or Denton Counties in Tx or anywhere else for that matter, gather information about your finances and educate yourself on your marital estate before you get taken advantage of!

People often believe that a divorce will relieve each spouse from joint debts.  Unfortunately, this is not true.  In fact, liability on joint debts cannot be relieved simply by dividing the debts and assigning liability in the divorce.  A divorce only apportions liability on debts between spouses and does not affect the ultimate liability to the creditor.  The most common example occurs with liability on a home mortgage.  Often, spouses jointly incur mortgage debt; then, upon divorce, one spouse takes the house and agrees to pay the mortgage balance.  However, the spouse that leaves the house and mortgage is not automatically relieved of that liability to the mortgage company.

Frequently credit card debts are held primarily in one spouse’s name primarily, even where both spouses may have signatory authority.  In these situations, the spouse who is the primary cardholder should take that debt in order to be in the best position to protect his or her credit.  This is true even where the debt is out of proportion to the overall division of the marital estate.  I had one situation where the bulk of the credit card debt was held in the wife’s name, but on divorce the husband was ordered to pay it.  The wife came to see me for help when the husband failed to make the payments, signficantly harming the wife’s credit. Unfortunately, there was very little I could do for the wife in that situation.  The husband cannot be held in contempt for violation of the divorce order for payment of debts because our U.S. Constitution prohibits “debtor’s prison”.  Obtaining a judgment against husband for the unpaid amounts would be meaningless to the wife — if the husband could pay a judgment, he would probably be paying the credit card payments.  In that situation, about the only advice I could give the wife was to seek the advice of a bankruptcy lawyer.

As for joint debts, the only way to be sure that the credit of the spouse not taking the debt after the divorce is protected is to payoff the debt using assets available in the marriage or using debt solely in the name of the spouse assuming the debt.  For example, if the parties are jointly responsible for a credit card debt, then the spouse assuming the debt could open a new account in his/her name only and transfer the debt to that account.  Then, the joint account would be closed by both parties.  Or, where a car loan is in both names, one spouse could refinance that debt into his/her name only.

Several problems exist regarding this proposal.  First, a court cannot force a spouse to refinace or incur debt in his/her name only.  So, this must be done by the agreement of the parties.  Or, where a spouse already has credit problems and cannot obtain new credit, this will not be a viable option.

There is no great solution to the problem of dividing jointly held debts in divorce.  If you know that a divorce is on the horizon, work with your spouse as early as possible to address joint debts.  Of course, if you aren’t able to do this, contact Dallas Divorce Attorneys at The May Firm for assistance.

I recently spoke at the UT Family Law on the Frontlines Seminar in Galveston on the Topic of helping clients deal with debts in divorces.  Debts can be a huge issue in any divorce. However, the divorce lawyer is very limited in her ability to change the liability on the debts. When two people get a divorce, the debts can be apportioned between them, but the liability to the creditor cannot be altered. So, for example, if two spouses purchase a car together and both names are listed as liable on the debt, the divorce will only order one of those people to pay the debt. It cannot change the fact that both people owe the finance company for the car. If the spouse that is supposed to pay the debt does not do so, then the creditor still has remedies against the other spouse, regardless of the language of the divorce orders. If you need advice about dealing with debts in your marriage or divorce, please contact us for an appointment.