Dividing debts in divorce just became a little trickier…

Created: May 4, 2011

In its recent decision in Gilliam v. McGrady, 279 Va. 703, 691 S.E.2d 797 (2010), the Virginia Supreme Court held that debts accumulated during the marriage are not necessarily presumed to be “marital debts” for the purpose of equitable distribution (“equitable distribution” refers to the process of dividing assets in divorce).  This is in contrast to the fact that assets accumulated during the marriage are presumed to be “marital assets” under the equitable distribution statute.  The Court reasoned that debts and assets are addressed separately in the statute and that, unlike the provisions pertaining to assets, there is no language creating the presumption that debts accumulated during the marriage are “marital debts” even if they are incurred in the name of only one spouse.  A good example would be a credit card debt when only one spouse is the account holder.

This decision increases the burden on a spouse claiming that a debt in their name alone was incurred for a marital purpose (i.e. a credit card that was used to buy groceries for the family).   Attorneys must pay additional attention to the factors set forth in Virginia Code § 20-107.3(E) and develop their arguments accordingly to meet this burden.

Time will tell just how stringently the trial court wish to apply this revised standard when apportioning debts during equitable distribution.  It is possible that the legislature will amend the statute to authorize a presumption with regards to “marital debts” as already provided for with respect to “marital assets”.  Until we get a better feel from the courts or clarification from our legislatures the best course of action, as always, is to be prepared for the worst while hoping for the best.  Brian Moore

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