The marital estate in a divorce consists of property and debt. The classification and division of property is discussed in the December 16, 2016, Blog entry. What happens to debt accrued during the marriage?
Unlike property, Tennessee statutes do not offer statutory guidance on how to divide debt. Therefore, the courts have developed common law to address the issue. All debt incurred during the marriage is considered marital debt, unless the parties were legally separated when the debt was incurred. An informal separation does not count. If there has been no legal separation, the debt meter stops on the date of the final divorce hearing.
In allocating marital debts to the parties after the divorce, the trial court is directed by the common law to consider four factors: (1) the debt’s purpose; (2) the party who incurred the debt; (3) the party who benefitted from incurring the debt; and (4) which party is best able to repay the debt. Alford v. Alford, 120 S.W.3d 810, 814 (Tenn. 2003). Who incurred the debt does not automatically determine who must pay the debt. It should also be noted that, although the court can order debts to be paid in a certain way, that order is usually not controlling on the creditor. Thus, for example, if a husband and wife jointly open a credit card account, divorce, and husband is ordered to pay the balance, the creditor may still pursue wife for satisfaction if the debt goes unpaid.