Category: Separated Couples

What is the Impact of Marital Debt?

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By Amy A. Edwards

I recently had a client ask what it means, exactly, to have marital debt. That’s a fair question. In North Carolina, the legal process of dividing marital assets and marital debts is called equitable distribution. Spouses or former spouses have a marital estate, and each usually gets half of the marital estate.  Think of the marital estate like a pie. Marital assets and marital debts make up the pie, which is sliced and cut in half.

With several exceptions, marital assets are assets acquired by either spouse during the time the parties are married and living together. Marital assets are the starting point of the marital estate pie but if there are no marital assets, then only the marital debt is divided between the parties. Separate property includes things like inherited property or property acquired before marriage. It is not added to the pie, so it isn’t be sliced up and divided between the parties. After the marital assets are divided, the debts are taken into account and either divided or not divided, depending on whether the debts are marital.

To be a marital debt, the debt must be generated during the marriage, and exist at the date of separation. The debt must be for the “joint benefit” of the marriage in order to be marital. Usually, a joint benefit is something that benefits both parties, even if the benefit is indirect, such as using a credit card for groceries, gas in the car, something for the children, etc.  If a debt is a separate debt, it does not have any impact on the pie that is the marital estate. The person with separate debt is stuck with responsibility for paying it. On the other hand, marital debt is “credited” to the share of the marital estate that the person paying the debt will receive. The marital estate is thereby adjusted to account for the payment of marital debts.

Example A (no marital debts)
Marital Assets: $100,000 (house equity, cars, etc.) ÷ 2 = $50,000 each
Husband gets $50,000
Wife gets $50,000

Example B ($10,000 in marital debt)
Marital Assets: $100,000 (house equity, cars, etc.) ÷ 2 = $50,000 each
Husband gets $50,000
Wife gets $50,000

But Wife pays $10,000 in marital debt, so she really only got $40,000.  Husband would owe Wife $5,000 in assets or money so that each spouse gets $45,000 (50% of the adjusted marital estate).  But if Wife paid $10,000 in separate debt (i.e., non-marital debt), she would not get any credit for paying it and each spouse would still get $50,000 in value for his or her share of the marital estate.

 

 

What is a Divorce From Bed and Board?

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In North Carolina, there are two types of divorces, an absolute divorce and a divorce from bed and board. (DBB).  An “absolute divorce” is a typical divorce that dissolves a marriage and allows a person to remarry. In our state, after a one year separation, either spouse may seek an absolute divorce. In contrast, the court must find there is marital fault before granting a DBB, which requires the spouse at fault to move out of the marital residence. The court enters an official DBB decree, stating that only the husband or the wife shall have the right to live in the marital home.  In that event, the other spouse must leave the home. Why do all of this to separate? Because people are correctly reluctant to move out of the family home for fear of committing abandonment. If a judge rules there is marital fault, it can easily cause a great deal of harm to a spouse during divorce litigation. This DBB process of a judge declaring a person to be legally separated is a rare event indeed, but it is still alive and well in our state.

Laws change. This article is current as of 2023.

Consequences of, and Incidents of, Marriage

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There are numerous legal rights and obligations when someone marries, some of which can be changed by a premarital agreement (or a separation agreement). Below is a brief (believe it or not) list of the rights and responsibilities, known as the incidents of marriage, that are different for unmarried partners:

Adoption (both spouses must join the petition to adopt)

Alimony and spousal support

Bankruptcy rights

Criminal law (duty to support, etc.)

Equitable distribution of marital assets and debts

“Family” rates (auto insurance, gym memberships, health insurance, etc.)

Health insurance rights

Immigration rights

Inheritance rights

Judgments for money owed

Marital privilege (testifying in court)

Military benefits and rights

Name changes

Next of kin designation (hospital, prison, etc.)

Paternity and birth certificates of children

Pension and other retirement benefits

Social security benefits

Survivorship rights

Taxes (filing status, deductions, exclusions, innocent spouse, etc.)

Torts, which are lawsuits for civil wrongs (alienation of affection, criminal conversation, loss of consortium, etc.)

Vital Records (right to personal records such as death certificates, birth certificates, etc.)

Welfare and public benefits

Wiretap Act exceptions allowing recording in some states

Zoning (number of unmarried or unrelated people in the residence)

Why Can’t We Use the Same Attorney If We Both Agree?

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This is a question I often hear during consultations. The potential client may say they agree on everything and don’t want to pay for a second attorney. Depending on the circumstances, there are at least two main reasons a family law attorney usually can’t take a case for both parties.

One reason is that representing both clients is a conflict of interest, or it creates the appearance of one. Another reason is that sifting through the case with an attorney uncovers a number of important issues that weren’t discussed between the parties.

What Is a Conflict of Interest?

A conflict of interest means divided loyalty. An attorney is required to zealously represent a client and act only in the best interest of that client. When that best interest of one party differs from, or conflicts with, the best interest of the other party, an attorney must choose which person to represent. Even taking on responsibilities that limit an attorney’s ability to fully represent the client is a conflict. In most family law cases, one person’s best case scenario is the other person’s worst case scenario. For example, if one spouse is seeking alimony and the other spouse is trying to use legal defenses to avoid payment, there is a conflict of interest. The State Bar has strict rules about an attorney’s ability to represent more than one party so the lawyer’s responsibility is only to one. Even when parties are in agreement about the outcome of the case and want a separation agreement, there are negotiations after the other spouse gets a copy of it to review. Your attorney cannot answer legal questions by the other spouse or give any legal advice to your spouse. Your ex should choose an attorney to advise him or her about the case.

What Else Matters Beyond the Agreement We Have?

Clients tend to think that once they address child custody or support, the house they own, or the payment of certain bills, they are finished with the unpleasant task of legally wrapping up a separation. A client may be disappointed to discover there are numerous topics he or she did not discuss with their ex. Many clients don’t stop to consider the tax implications of their settlement, whether the money they exchange will be taxed as income or as a tax deduction, and whether the division of retirement assets will be subject to taxes and IRS penalties instead of simply being treated as a tax-free exchange of marital property. A court order is usually required to divide retirement assets the proper way, to avoid detrimental tax consequences. Even if the parties agree concerning alimony, it must be addressed properly to get tax benefits (or to avoid tax burdens).

Lots of Details

Clients look at the big picture of custody and visitation agreements. The devil is in the details. When they say they have already agreed to a custody schedule that gives each parent ½ of the Christmas, what does that mean? Do they mean December 24th and 25th every other year or did they assume the holiday was determined based on the school calendar, from the first day off until the day school starts? Does either parent intend to go out of town for Christmas and need to add specifics concerning the travel arrangements over state lines? Other typical problem issues include an “agreed upon” amount of child support. Parents might have an agreement that one pays for daycare while the other pays for health insurance. That tends to be unrelated to the way the state determines child support. Is there an argument that a bonus or commission should be included as income? What about extra-curricular expenses, sports and the payment of medical expenses not paid by insurance? Will there be out-of-state travel expenses by one parent? Should child support be calculated based on a shared visitation schedule or the more typical visitation schedule? And yes, you pay your attorney to be a pessimist, which usually means making sure things are handled properly at the beginning of your case after your attorney gives you legal advice. The decisions will be yours to make, but don’t assume you’ve reached an agreement until you know all the questions have been asked.

Can’t We Just Pick a Date of Separation and Get Our Divorce?

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The short answer is no, you can’t choose a date of separation. In the real world, efficiency and common sense would suggest that you could. But this is not an agreement to apply for “services” from the government. It is a lawsuit, and a judge must use the law. Divorce is a legal status, similar to a legal status of biological parent in a paternity case, for example. Each state has laws dictating how long a married couple must be separated before they are eligible to divorce. Here in North Carolina, the law requires a one-year separation. This should not be confused with our residency requirement. It requires at least one spouse to live in this state for six months before he or she is allowed to file a claim for divorce, even if the parties have already been separated for a year when one spouse moves here.

All Divorces Are Lawsuits

It can be easy to forget that even uncontested divorces are filed by a plaintiff, served on a defendant, and ruled upon by a judge. In fact, most people don’t even have to be in court. Except for incurable insanity, the only ground for a divorce in North Carolina is a one-year separation. This requires that at least one spouse intends for the separation to be permanent, although there is no requirement that the lawsuit say which spouse intends to remain apart. Examples of one-year separations that don’t fit into this category are couples who are only separated by military service or incarceration. They are not separated unless one spouse intends to remain separated (i.e., that person does not want to move back home when no longer physically separated).

The divorce complaint, the document that starts the lawsuit,  cannot even be signed until the day after the year has passed. When you sign the complaint, you do so under oath, under penalty of perjury, which is a crime. Worse yet, if you lie about the DOS, your fraudulently obtained divorce can be set aside (voided) because you were not separated for one full year.

Why Do We Have to Wait a Year?

The government doesn’t want you to have a fight with your husband or wife, separate for a few days or weeks, get divorced and then reconcile and remarry. Many lawyers, myself included, believe the length of separation is too long. Some states require a longer wait only if the couple has children, and let the non-parents divorce much sooner. Although many believe the waiting period is excessive, it is the law and we must all obey it. There are plenty of others who believe one year isn’t long enough. Our state laws used to require a two-year waiting period. Not too long ago, there was a proposed “Healthy Marriage Act” that would’ve restored the two-year waiting period. In fact, it would have required counseling of some sort for parents and non-parents alike.

Can We Just Stay on Opposite Ends of the House?

Although the idea of separating in the same house is a clever one, it is inadequate. A separation requires living under two different roofs. This can be difficult for couples who don’t have enough money to establish two separate homes. But if separate homes weren’t required for a separation, it would be impossible to clearly identify who is or isn’t separated. Your spouse could claim the one-year separation had already occurred, and you could have a sheriff serve you with a divorce complaint out of the blue. Brand new parents need the whole nine months to figure out what they are doing with this new legal title of parents. And, so it is with divorces. You have to figure out medical insurance, where you will be living for the immediate future, your short-term finances, sometimes your employment, and perhaps what to do about your children. On the upside, the clock no longer stops ticking if there are “isolated incidents of sexual intercourse between the parties . . .” In the past, you could be separated for a long time but any sexual intimacy restarted the clock for one-year separation.

See NC Gen. Stat. §50-6

Forgive and Forget: Condonation in North Carolina

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Judges have a good deal of leeway in deciding what to do about marital fault and defenses when they are proven in court. Traditional sex roles are rapidly changing in some ways but not in others, and judges react differently to the behavior that constitutes marital fault. Some think fault is very important, but others do not. Marital fault relates to alimony, not equitable distribution, which is the division of marital property.

What Are the Marital Fault Grounds?

A spouse commits marital fault if he or she abandons the family, commits adultery, “maliciously turns the other out of doors” or “by cruel or barbarous treatment endangers the life of the other.” If a spouse “becomes an excessive user of alcohol or drugs so as to render the condition of the other spouse intolerable and the life of that spouse burdensome” that is also marital fault. The last ground of marital fault, known as indignities, is a catchall for bad behavior generally. It occurs when a spouse “offers such indignities to the person of the other as to render his or her condition intolerable and life burdensome.” NC Gen. Stat. §50-7.

Consequences of Marital Fault

Marital fault is not a requirement for alimony. But if someone commits marital fault, the judge can financially penalize the person receiving or paying support. In cases of adultery, the financially-dependent spouse who cheated cannot receive alimony, and the supporting spouse who is the bread-winner must pay alimony if he or she cheats. The policy is based on the historical tradition of an innocent dependent spouse who was left financially stranded by the other, who left for greener pastures with another romantic interest, for example.

What is a Defense to Marital Fault?

A defense means that you can be shielded from the consequences the marital fault that you committed. A defense excuses the bad behavior (i.e., the marital fault) and gives the spouse at fault a “clean slate” legally. From our example above, if you are an adulterous supporting spouse without the legal defense of condonation, you are automatically required to pay alimony. The only remaining questions at the point is the amount of alimony to be paid, and for how long.

The Defense of Condonation

Condonation, condoning bad behavior, is as a defense to a spouse’s marital fault. Black’s Law Dictionary defines condonation as “conditional remission or forgiveness, by one of the married parties. . . the condition being that the offense shall not be repeated.” If you forgive your spouse for having an affair, for example, you do so on the condition that he or she never cheat again. Critics of condonation argue that it discourages reconciliation because the victim of the fault can be penalized for trying to save the relationship. On the other hand, the policy makes sense when you consider a 25-year-marriage, and the prospect of arguing about an affair that happened 21 years ago. Although the law delves into the reason for the separation, it does not delve into the marriage.

How Do You Prove Condonation?

To have the benefit of the forgiveness, the condonation defense, the spouse at fault must first prove that the innocent spouse knew that the misconduct occurred. It isn’t enough that he or she suspected the misconduct happened. The second requirement of condonation is to show that the innocent spouse voluntarily chooses to continue or resume the marital relationship. This is shown in one of two ways. A spouse can directly communicate forgiveness, such as writing a letter or sending an e-mail. Or, forgiveness can be shown when the innocent spouse voluntary engages in sexual intercourse after knowing about the marital fault. But isolated acts of sexual intercourse are not enough to give a spouse the defense of condonation.

Recent Condonation Case

On December 18, 2018, the NC Court of Appeals made a ruling about marital fault and defenses to it in Gilmartin v. Gilmartin. The husband had an addiction to pornography and communicated with women online. Multiple times, he denied doing these things. When his wife discovered that he was in fact doing these things again, he admitted doing them and promised her that he would go to counseling. He continued the behavior and stopped going to counseling. When he argued that she had condoned his behavior, the Court of Appeals agreed with the trial court, that she did not condone his “continuing ‘use of pornography and online sexual solicitations’ because Husband ‘deceiv[ed]’ her into believing he had ceased the behavior.” Without knowing about the behavior, she couldn’t forgive him for it.

Marital Fault

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Although the role of marital fault has been narrowed a great deal over recent years, it is still quite alive and kicking. Fault is not a factor in the divorce itself, but it does come into play with other claims that are filed with the divorce. NC acts of marital fault are listed by statute, as well as case law, decided by the North Carolina Court of Appeals.

Adultery

The deal-breaker in cases that consider marital fault is adultery but under certain exceptions, the spouse who commits fault may be given a clean slate so to speak. There are random defenses to these fault claims, but they are beyond the scope of this article. Based on my observations over the years, adultery is by far the most litigated fault ground. It is designated by statute as “illicit sexual behavior” and it “means acts of sexual or deviate sexual intercourse, deviate sexual acts, or sexual acts defined in [rape laws], voluntarily engaged in by a spouse with someone other than the other spouse.” Adultery is rarely proven by a “smoking gun” complete with photos or videos, as we see on television. In real life, adultery is proven with different types of evidence, including testimony of witnesses. Alimony may be proven with a collection of evidence, taken as a whole, not just one item of evidence.

Other Acts of Marital Fault

Other acts of marital fault include maliciously turning the other spouse outdoors, and treating him or her cruelly or barbarously endangering his or her life. Also considered marital fault is a spouse being an “excessive user of alcohol or drugs” when it makes the other person’s life intolerable. Closely related to that ground is another bad behavior: “involuntary separation of the spouses in consequence of a criminal act committed.” In other words, this refers to a spouse who is incarcerated. Although the law includes “reckless spending of the income of either party, or the destruction, waste, diversion, or concealment of assets,” as marital fault, it can be difficult to show the other person’s intent as it relates to their money management.

Indignities

Marital fault includes “other such indignities to the person of the other as to render his or her condition intolerable and life burdensome.” This quaintly worded bad behavior requires more than a single time or two, which the law deems a “course of conduct.” Our courts do not tell us exactly which bad behavior is included under this definition, preferring instead to consider it on a case by case basis. Many behaviors may qualify as marital fault. One North Carolina case says behavior included in the term “indignities” includes “unmerited reproach, studied neglect, abusive language, and other manifestations of settled hate and estrangement.” However, indignities can consist of willful failure to provide necessary subsistence according to one’s means and condition. Like the reckless spending fault, this one may be difficult to unravel because people manage their finances in many different ways.

Abandonment

In short, abandonment is a marital fault consisting of one spouse leaving the other spouse without justification. One creative attorney just made up a new fault ground in 1987, and named it “constructive” abandonment. It stuck, and the NC Court of Appeals has recognized it as marital fault. Any time the law needs to prevent some injustice from happening, it may choose to essentially pretend a certain thing exists, and they say it is “constructive.” As used here, constructive abandonment means that even if the spouses are both at home and no one physically abandoned the home, the court may choose to treat a spouse as abandoning the home anyway if the behavior was bad enough.

See: NC Gen. Stat. 52-B, NC Gen Stat. 50-7, NC Gen Stat. 50-16.1A, Evans v. Evans, 169 NC App 358 (2005), and Ellinwood v. Ellinwood, 88 N.C. App. 119 (1987)

Have You Reconciled With Your Ex?

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Besides obtaining a divorce, the date a couple separates can have a significant impact on equitable distribution of marital assets and debts, child support and alimony. When a married couple decides to call it quits, there is some date they separated.  But when is it? The answer is not always as simple as it sounds. There is a myth that people can’t be separated for purposes of divorce until they have something on paper. That is not the case. In North Carolina, if parties stop living together, and at least one intends the separation to be permanent, they are separated. Physically living apart is a requirement, however. Living in the same home in different rooms or out-buildings such as the garage or “man cave” is usually not enough. Despite what was portrayed in the War of the Roses movie when one duct taped a line down one-half of the house, you can’t do it that way here if your goal is to seek a divorce.

The State Policy

From the viewpoint of the public policy behind this one year waiting period, marriages should be fostered and divorce should be discouraged to some extent.  A waiting period gives spouses time to cool off after a major dispute. The courts would no doubt be much busier if there was no waiting period and either party could apply for a divorce on Monday morning after a fight on Friday night. There is debate about whether the year-long waiting period prevents divorces, thereby preserving marriages. The requirement that at least one of the parties intend for the separation to be permanent makes sense when you think about happily married people who are physically separated because of military service or because one of them spends an extended period of time in the hospital, for example.

What If We Try to Work Things Out?

Another question in determining whether you are separated for the purpose of divorce is whether you have made any efforts to reconcile. If a couple reconciles, meaning they return to the husband and wife relationship they had before the separation, they are no longer separated. If they reconcile and later decide to separate again, the one year wait begins from that second date of separation. Years ago, the one year period of separation required to seek a divorce would start over if the parties had intercourse.  Now, the law says that an isolated act of intercourse will not start the clock over again but beyond that, it is not always clear at what point they reconciled or separated. Reconciliation and making efforts to work things out can lead to one of the spouses moving back into the home, which is almost always viewed as reconciling in legal terms. There is no black and white answer on whether the actions of a couple between those two extremes would require the one year waiting period to begin all over again. The court looks at the circumstances of each case when the date of separation is disputed.

What is a Separation Agreement?

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A Separation Agreement and Property Settlement is a voluntary contract between a husband and wife of ex-spouses. It may be signed no sooner than separation, and may be signed at some later date, even after the parties divorce. The parties can settle some or all of the issues, including child custody, spousal support (alimony), child support, and division of marital property and debts (equitable distribution). The laws are written to encourage settlement instead of litigation. Therefore, a properly drafted separation agreement is extremely difficult to change or void.

What Things Can We Include in the Agreement?

Because they are contracts mutually agreed upon, separation agreements can include just about anything. One of my favorite war stories involved a case where we agreed on horse custody and visitation. We even included terms for which farm the horses would stay and whether each “horse parent” would be entitled to allow future romantic partners to ride the horses. That type of outcome will never happen in court. In our state, horses are legally treated as personal property no different than a television or set of china.

Express Lane: Is There a Form I Can Use?

Even some attorneys who don’t handle family law cases, or just  dabble in family law, do not realize there is no “boiler plate” form.  In fact, separation agreements are popular because they can be customized to whatever terms agreed upon by the parties. Imagine going to a mechanic and asking for “the standard repair.”  All cars have tires and a steering wheel, but a Corvette and a VW Bug don’t call for the same repairs.  It is no different with attorneys who draft separation agreements. Some are very complex, but others might not be.

While separation agreements do have certain magic words for the more routine things, such as jurisdiction of the court to interpret the agreement for example, a good attorney will address dozens of other issues specifically. For instance, the agreement might include a disclosure paragraph that dictates whether the parties are obligated to tell each other about hidden assets, inheritance rights, or address certain significant tax consequences.

Buyer’s Remorse: Enforcement

Separation agreements can be written to spell out the types of enforcement mechanisms that will be used if it is violated. The agreement may be treated like a contract, which is enforced by a lawsuit based on breach of contract. Other times, the agreement may be drafted to become a court order at some later date, enforced directly by the court. The agreement can say that violations will trigger certain consequences. Or, it may dictate when and how child custody and/or support lawsuits can be filed at some later date. All of these enforcement options are another example of ways attorneys draft agreements based on each client’s specific needs and priorities.

Free-Trader Agreements in North Carolina

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When a married couple separates, if they can reach an agreement on all of the issues between them, they may choose to sign a separation agreement. A separation agreement is a contract that says how they have agreed to divide property and debt, how family support will be provided, if any, and what they will do about parenting time if they have children together. One of the usual terms contained in it is a free-trader-agreement (FTA). If there is no separation agreement, an FTA can be a short contract by itself.

What’s the Problem?

When married couples acquire a mortgage loan, both usually sign the promissory note, which means they both have a legal obligation to make mortgage payments. That’s pretty straightforward. But when only one spouse signs a promissory note, only he or she owes the money. To oversimplify the problem, if the home-owner dies before becoming divorced, the surviving spouse has no legal responsibility to make the mortgage payments. But regardless of the fact that a married couple is separated, as a spouse, the non-home-owner would still have certain inheritance and survivorship rights to the property.

Remedy #1 – Free Trader Agreement

Mortgage lenders regularly require separated parties to sign an FTA, which is an agreed-upon right for each spouse to buy (i.e., trade) freely (i.e., without interference from the other) before they lend money to buy a home. The mortgage company will own the home if they foreclose on the loan. They don’t want to share ownership of the home with the other  spouse who isn’t even obligated to make mortgage payments. The purpose of an FTA is make sure the non-buying spouse waives all claim to the house, including inheritance and/or survivorship rights.  These agreements clarify that either spouse is free to get a mortgage in his or her name individually, without the signature of the other spouse. FTAs are recorded at the office of the Register of Deeds, which makes them public record. With the agreement, the spouse buying the home has exclusive ownership of it (and the responsibility of paying for it) even though he or she is married. Like all contracts, both parties must voluntarily agree to sign it.

Remedy #2 – The Divorce

When a divorce decree is granted, the other person is no longer a spouse, so the mortgage lender no longer has the problem of an ex who is still a surviving spouse even if they were separated for some time when the home was purchased. However, in North Carolina, a spouse can’t even file for the divorce until he or she has been separated for at least one full year. When a spouse files for a divorce, it can take two to three months before the divorce decree is granted. When the other spouse refuses to sign an FTA, the only remedy is the divorce, which is nearly impossible to contest because it is based on a one-year separation.