During a divorce, most couples think primarily about how the assets they have will be split up. They want to know who will get the house, the retirement accounts, and the most time with the kids. What many couples may not realize is that the debts of the family must also be split between the couple when they divorce, particularly when those debts are accrued during the marriage. A recent case before the Wisconsin Court of Appeals looks at how the repayment of credit card debt that arose during a marriage should be allocated between divorced spouses.
In Collison v. Wyderka, Andrew Wyderka and Allison Collison were married over a period of 12 years, starting in 2001. During that period of time, Allison accrued over $24,000 in credit card debt on a card that was in Andrew’s name. According to Allison, the debt was based on purchases made for the family and benefited all of the family members. Eventually, the card became delinquent and went to collections. Allison enlisted the help of her father, and he managed to negotiate the debt down to $7,500, which he paid off in full. Allison and Andrew promised to repay Allison’s father for the debt.
Shortly after the repayment, Andrew filed for divorce. During the pendency of the divorce proceedings, Allison’s father sent a letter to Andrew, demanding repayment of the debt. A small claims court action was eventually initiated. Allison’s father sought repayment of the debt. Andrew then sued Allison for her portion of the repayment, and Allison countersued Andrew, claiming that he had agreed to pay the debt in full.
The lower court ultimately concluded that Allison and Andrew were each half responsible to repay the amount in full to Allison’s father. Andrew then appealed.
On appeal, Andrew argued that there was no written contract between Allison’s father, Allison, and Andrew requiring repayment of the debt. He further argued that to the extent that Allison and her father had an oral agreement that she would repay the debt, that agreement did not bind him in repayment. Accordingly, he contended that there was no legal requirement for him to pay half the debt.
The Court of Appeals disagreed. It agreed with Andrew that the primary agreement for repayment was between Allison and her father. Allison had sought out her father’s help in negotiating down the balance to be paid and then paying it off. However, the Court held that both Allison and Andrew had benefited from the repayment. Since the debt was accrued during their marriage and for the benefit of the marriage, it was a community debt held by both of them, and, in paying it off, both Andrew and Allison had benefited.
The Court of Appeals further held that it would be unfair for Andrew to retain this benefit of having his portion of the debt paid without any obligation to repay Allison’s father. The court held that Andrew knew this was a benefit that he had received before the divorce began, and it was a financial obligation that should have been distributed equally between the former spouses at the time of the divorce. Accordingly, the Court of Appeals affirmed that Andrew was obligated to pay for his half of the credit card repayment to Allison’s father.
If you are facing the prospect of significant debt in your marriage, it is important to realize that divorce is not a means of avoiding that debt. If the debt was incurred through credit cards used during the marriage, the purchase of a family home, or the purchase of cars used by the family, for example, a court is likely to find that this debt should be distributed equally between both divorcing spouses, and it will need to be repaid even after the divorce is finalized.
If you are concerned about debt and your divorce, you should discuss options for handling the division of assets and debts with an experienced Milwaukee divorce attorney as soon as possible. To speak with a knowledgeable divorce lawyer today, do not hesitate to contact the law offices of Reddin & Singer, LLP online or give us a call at 414-271-6400.