Frequently Asked Questions – Marital Debt

When two parties are going through a divorce, the property between the parties needs to be equitably distributed between the two. However, it is not just assets that need to be taken into account. Marital Debt will be considered when a division of assets is occurring, which can have major impacts on how property is divided. Whether a debt is marital or not can sometimes be a confusing process, as the line between marital and non-marital debt is not always clear. While this process can be complex, there are a few basics that you should know before beginning. Here are some frequently asked questions that the Greenberg Legal Group often receives about Marital Debt and the impact it has on property division during divorces in Maryland:

1. What is “Marital Debt”?

A “Marital Debt” is a debt that is directly traceable to the acquisition of marital property. These debts are incurred during the time the parties are married. Some common examples of Marital Debt are the mortgage on the family home or a car loan for the family vehicle. Marital debts will be taken into account by the Court and will be factored into how the Court equitably distributes marital property when the divorce is finalized. See, Schweizer v. Schweizer, 301 Md. 626 (1984).

2. What is “Non-Marital Debt”?

By contrast, “Non-Marital Debt” is a debt that is not directly traceable to the acquisition of marital property. These debts are often incurred before the marriage, but they can be incurred during the marriage as well. Whether a debt incurred during the marriage is Marital Debt or not will often require some deeper investigation. Some common examples of Non-Marital Debt are student loans that one party took out before the marriage or credit card debt accrued by one of the parties before the marriage. The party that incurred the Non-Marital Debt will normally be responsible for paying off that debt.

3. How does Marital Debt impact the distribution of assets?

As discussed above, Maryland uses the principle of equitable distribution when determining how to divide marital property. It is important to note that equitable distribution does not necessarily mean an “equal” or 50-50 distribution; instead, equitable distribution should be better understood to mean a fair distribution of marital property based on certain statutory factors. The Court will take into account the monetary and nonmonetary contributions by the parties to the marriage as well as a number of other factors when making a determination as to the equitable, or fair, distribution of the property.

Marital Debt will play a role in what the actual assets and property are that the Court will divide equitably between the parties. Once the Court determines what assets are Marital Property that should be divided, the Court will then factor in any Marital Debt associated with those assets. If a marital asset is worth less than the amount of debt remaining on said asset, the value of the asset will be reduced to zero. If the marital asset is worth more than the debt remaining on said asset, the value of the asset will be reduced by the outstanding debt on it, which will give the Court the value of that asset. See, Randolph v. Randolph, 67 Md.App. 577 (1986). Once this process is complete with all of the marital assets and debts, the Court will have the value of the marital property to be equitably distributed between the parties. The Court will then move on to the next step of determining the equitable distribution of marital property.

Robert Greenberg, Esq. and the law firm of Greenberg Legal Group LLC have extensive experience representing clients in divorce cases involving marital property and debt. Our firm is located in Annapolis, Maryland and practices in Courts throughout the State of Maryland. Please contact our office at (410) 650 – 4242 for further assistance.