An issue that frequently arises when a marriage breaks up is who pays the household bills while the divorce is pending. A lot of times the spouse who paid the bills during the marriage will continue to pay utility bills and homeowner’s association or condo fees while making mortgage payments on the marital home. If you’re the one making those payments, you’re probably wondering whether a divorce judge will give you some sort of credit for it when dividing up the marital property. In other words, will you get a bigger share of the remaining property in consideration for the bills you’ve paid or be saddled with a smaller share of marital debt?
The answer is that it depends on the situation and the laws where you live.
Take, for example, a recent case from North Carolina, where it all came down to the concept of “active” versus “passive” decreases to marital debt.
In that case, Robert and Christine Grennan were getting divorced after 30 years of marriage. After the couple separated, Robert paid the taxes, homeowner’s association dues and insurance on a home he and Christine owned. Robert hoped that by paying these bills out of his own separate earnings he’d get some credit when the judge split up the property, since he was contributing to a reduction of the couple’s debt.
However, not only did the judge deny Robert any credit, she ordered him to cut Christine a check so she could walk away with the full amount of property she’d been awarded.
Robert appealed, arguing that the trial judge made a mistake by denying him credit for the bills he’d paid. But the North Carolina Court of Appeals disagreed. According to the court, Robert’s payments represented an “active decrease” to the marital debt. In other words, he took action by writing checks to reduce the amount of the marital debt. Under a 2013 change in North Carolina law, increases or decreases to marital debt must occur “passively,” such as through a change in market conditions that might affect the value of an asset or debt, in order for them to alter the marital property that can be divided.
In a Florida case, the operative factor was the date the court used for valuing an asset.
In that case, a couple was divorcing after almost 40 years of marriage. The husband, who had been the breadwinner, had several bank accounts in his name, two of which had a total of $8,300 when the divorce petition was filed. But by the time the final hearing rolled around, these accounts only had a balance of $2,400.
According to the husband, this reduction occurred because he’d been using those accounts to pay expenses related to the marital home. He argued that the court should use the balance as of the date of the final hearing for the purpose of calculating the marital estate. This would, in essence, give him nearly a $6,000 credit for the expenses he’d covered.
The trial judge disagreed and used the $8,300 figure. But a state appeals court reversed the decision, citing a Florida law that courts shouldn’t include assets in an equitable distribution that have been diminished during the divorce proceedings unless the asset has been dissipated through a spouse’s misconduct. Here, the court said, the husband was acting in good faith and shouldn’t be punished for covering the bills.
Despite this case, in many instances you won’t get legal credit for paying the bills without a binding agreement in place. That’s the type of thing a family lawyer can help you with. Be sure to bring this up with a divorce lawyer as soon as you think you may be separating.