Property in Divorce Proceedings: How are Debts Handled?

In my last post, I gave a brief primer on Michigan's separate property designations.

Property can generally be divided into two broad categories: marital property and separate property. There are also typically various forms of debt that the parties have individually and collectively accrued during the course of the marriage. This post will briefly discuss basic information about how marital and separate debt is handled in divorce. This discussion should be considered introductory and not exhaustive.

Debt may be thought of as an asset that has negative worth. So, debts entered into by one party prior to marriage will typically be assigned in a manner similar to separate property. Conversely, debts entered into by either or both parties during the marriage will typically be assigned to both parties by the Court. The general exception to this principle is that if one party entered into a debt that is plainly for only their benefit or purpose, then the Court can choose to assign that debt solely to one party. Examples: debt incurred while conducting an extra-marital affair, drug or alcohol consumption that is hidden and separate from the parties' lifestyle, gambling addiction.

What about student loans? The court may, or may not, choose to assign student loans to one or both parties. There is no common law precedent in Michigan on this issue. Parties carrying debts, particularly non-dischargable debts, whose payments are "onerous" may be considered by the Court during its analysis for awarding or reducing spousal support.

Married men do not have an "automatic" claim to the employment earnings of their wives during the marriage. Married women probably do have an "automatic" claim to the employment earnings of their husbands during the marriage. This is a particularly hot topic for some men. The Michigan Supreme Court upheld the Married Women's Property Act as recently as 2011! See: North Ottawa Cmty Hosp v Kieft, 457 Mich 394, 578 NW2d 267 (1998).

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