Dividing Debt During Divorce in the D.C. Metro Area

This topic is part of Property Division in Fairfax and Loudoun.

As our federal legislators struggle to address the mounting federal debt, family law practitioners in the Washington, D.C. Area are treading softly with diverging treatments of family debt in the District of Columbia, Maryland and Virginia.

The District of Columbia provides perhaps the clearest roadmap for dealing with debt in family law matters.  The District’s equitable distribution statute explicitly authorizes the valuation or distribution of “all property and debt in a manner that is equitable, just and reasonable, after considering all relevant factors…”  See DC Code § 16-910(b).  Dealing with debt is further simplified by the District’s property dichotomy: it recognizes only separate and marital property.

The state of Maryland is quite different.  Though case law broadly defines marital debt as debt incurred to acquire marital property and discusses using it to reduce the value of marital property for equitable distribution purposes, no express statutory authority exists to permit a court to allocate debt between the parties.  See generally Schweizer v. Schweizer, 301 Md. 626; 484 A.2d 267 (1984).  Instead, Maryland courts indirectly allocate debt under the State’s equitable distribution factors by considering “the value of all property interests of each party” and “the economic circumstances of each party at the time the award is made.”  Md. Fam. Law Code § 8-205(b)(2) and (3).

In 2011, the Virginia General Assembly changed how the Commonwealth dealt with debt.  One year prior, Gilliam v. McGrady, a 2010 Supreme Court of Virginia case, held that the equitable distribution statute created no presumption that debts incurred during the marriage were marital. Instead, ordinary burden-of-proof rules applied: proof that a debt was incurred jointly made a prima facie case that it was marital, and proof that it was incurred individually made a prima facie case that it was separate, shifting the burden to the other spouse.
 279 Va. 703, 691 S.E.2d 797 (2010).  This framework, however, necessarily required family law attorneys to introduce and work through scads of individual charge card statements in an attempt to shift that burden.  Thankfully, the General Assembly promptly responded to Gilliam by amending the equitable distribution statute in March of 2011 to include definitions of separate debt and marital debt, and clear presumptions regarding the treatment of same.

Jason A. Weis, Esquire – Curran Moher Weis P.C. – jweis@curranmoher.com –  10300 Eaton Place, Suite 520Fairfax, VA 22030 – 571-328-5020

This article provides general information about Virginia law and is not legal advice. Reading it does not create an attorney-client relationship. The application of the law depends on the specific facts of each case.