What to do when a spouse racks up debt

What to do when a spouse racks up debt

It’s an issue that becomes even more contentious when one party dramatically outspends the other and is responsible for racking up the majority of the couple’s debt — especially when the more prudent partner learns what’s in Wisconsin’s Marital Property Act.

The act essentially calls for couples to divide all assets and all debt equally, regardless of who contributed more to either side of the balance sheet.

Courts want everything to be split 50-50. That means if you have a car loan, the person who keeps the car will likely keep the car loan. The same goes for the home.

If you are planning to divorce a spendthrift spouse, it’s important to note that courts often will refer to the divorce filing date as the point where finances also split. Beyond that date, courts generally will not include new debts unless they were incurred in the interest of the family. So a debt incurred for new clothes for the children may be included while a credit card payment for a new tablet computer may not.

Occasionally, one spouse will attempt to hide assets or debts during a divorce, but the courts require full disclosure and signatures on financial statements under oath. Hiding assets and debt not only creates a mess with creditors, it also exposes the dishonest spouse to perjury charges, not to mention the added expense of working out complications in the court system.

Once a divorce is filed, a spouse may request a temporary hearing to request the court issue temporary orders concerning credit card use or loans. That’s why some spouses will simply file for legal separation or divorce — to stop the joint debt from accumulating — even if they have every intention of remaining married.

If you have a spouse who is racking up debt and filing for divorce or legal separation is untenable, you have three other options:

  • Visit a trustworthy credit counseling service. Lay everything out and see if the service can help you work out payment plans with creditors. Understand this will only work if both parties go in good faith.

  • File for bankruptcy. If the debt is insurmountable, you can try to discharge it. While bankruptcy understandably carries a stigma, it may be the best way to keep your family intact.

  • Enter a marital property agreement. This is much like a premarital agreement in that it lays out division of assets and debt; it just does it once the marriage has already occurred. Note that the only way such an agreement can help you with a creditor is if the creditor receives notice that there is a marital agreement addressing certain debt prior to extending credit.

Of course, the best advice is to be transparent with your spouse and remember that “for better or worse” also applies to finances.

What to do when a spouse racks up debt

By Sonja Davig, Family Law Attorney, Johns, Flaherty & Collins, SC. For a La Crosse divorce lawyer, call her at 608-784-5678.


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