When I was young, I had a debate with my father about whether a person could be judged by who that person associated herself with. My father said that to associate yourself with an unscrupulous person is to give people the impression that you too are unscrupulous. Of course, I disagreed with him about this. Not only did I think this concept of “guilt by association” was unfair, I also did not think that this is how the real world worked. Oh, how little did I know!
In many marriages, there is one spouse who makes all (or most of) the financial decisions. Sometimes, the person making those decisions engages in conduct that is deceitful or damaging to the family financial situation.
For example, I have had clients tell me that during the marriage his/her spouse lied on the joint income tax returns, and that as a result taxes/penalties are owed to the taxing authority. I have also had clients tell me that it was the practice of his/her spouse to borrow to the hilt to finance a lifestyle the family could obviously not afford, driving the family deep into debt. The client always wants to know how to avoid responsibility for the consequences that occur as a result of the financial decisions made by his/her spouse.
In general, under New York law any debt that is acquired during the marriage is considered marital debt. It does not matter whose name is on the debt. If your spouse accumulates $100,000 of credit card debt during the marriage, the presumption is that the debt is marital, even if your name is not on the credit card or you do not use the card. The effect of this general rule is that in a divorce action a court could decide that you must bear some responsibility for the debt that was accumulated.
Turning a blind eye to what your spouse is doing during the marriage does not absolve you of any responsibility. If your spouse lied on the joint income tax return and you signed that return anyway, you will most likely bear some responsibility for the consequences of that lie.
Claiming ignorance about the existence of the debt also may not be a defense. If the annual income of your family is $50,000 but you are living a $100,000 lifestyle financed by credit cards, you will have a very difficult time convincing the court that you had no knowledge about the debt. The money had to come from somewhere!
Marriage as a romantic institution is a recent notion. For thousands of years, it was for economics only. While we “marry” those concepts today, many are blind to the business side of the relationship until it is too late.
The moral of this story is that you can be responsible for the bad financial decisions made by your spouse, no matter how little participation you had in making those decisions. My dad was right. “Guilt by association” does exist. Dad, if you’re reading this article I will save you the phone call: you did tell me so!