Division of Assets and Debts
You and your spouse have assets and debts, some from before the marriage possibly, and some obtained or incurred during the marriage. How are those assets and debts divided and allocated in the divorce? This chapter will address many of your questions by explaining what would happen if your property and debts are allocated and divided by a judge at trial.
Realize, however, that you and your spouse are free to agree upon how to handle the division and allocation of your assets and debts. If you agree, a trial on these issues is not necessary, and the judge will simply accept your agreement. It is very important to become educated regarding your property issues before you begin to negotiate with your spouse.
8.1 Is Virginia a Community Property State?
No, Virginia is an equitable distribution state.
8.2 What Does Equitable Distribution Mean?
Virginia has an equitable distribution system for dividing the assets and debts (for cases in which the parties are unable to resolve the division of assets and debts by agreement). The judge allocates the assets and debts after considering the evidence presented at trial. Though an equal division is common, the judge may divide the assets and debts unequally.
8.3 What Is Meant by Marital Property, Separate Property, and Hybrid Property ?
If your case goes to trial, the judge is required to “classify” each asset and debt. The marital property category includes all property obtained during the marriage by the efforts of one or both of the parties. The separate property category includes assets owned or obtained by one of the parties before the marriage, after the parties separated, or during the marriage by gift (not from the other spouse) or inheritance. The hybrid, or part-marital, part-separate category includes property that has both marital and separate elements. For example, a house purchased with one spouse’s inheritance as the down payment, with a mortgage that is paid during the marriage with the parties’ earnings is a hybrid asset.
8.4 What Is the Significance of Property Classification?
If your case goes to trial, the judge can only divide and allocate marital (and the marital share of hybrid) property. Each party keeps his or her own separate property. The issue of classification is one of the biggest issues in some cases.
8.5 What Are the Equitable Distribution Statutory Factors ?
The equitable distribution statutory factors identify the evidence that the judge will receive at trial and will consider in making his or her equitable distribution ruling. Your attorney will review these factors with you, and discuss how they apply to the evidence in your case. In many, if not most, cases the parties’ assets and debts are equally divided. In some cases, based upon the evidence presented, one party will receive a greater share of the assets or the debt. The equitable distribution statuary factors are listed in the appendix.
8.6 How Is It Determined Who Gets the House?
The house is awarded to the spouse that has the house titled in his or her name. If the house is jointly titled, and the parties cannot agree, then the judge will allocate it based upon what make the most sense. For example, are the mother and the children currently living in the house? Is the house built on land gifted from the husband’s family, and surrounded by the husband’s parents and siblings? The party receiving the house has to be able to refinance the mortgage to end the other spouse’s obligation for the mortgage. Which party can afford to do this?
8.7 How Do I Determine How Much Our House Is Worth?
Start with the real estate tax assessment provided by your locality. A realtor can provide additional information. If you need to present a value for trial, you or your attorney will have to arrange for a real estate appraisal by a licensed real estate appraiser.
8.8 My House Is Worth Less Than What Is What Are My Options?
The exact solution will depend on whether either you or your spouse is interested in receiving the house subject to the debt. If neither of you wants the house, then it will have to be sold. A normal sale will require that you and your spouse pay the mortgage in full at closing, so you will have to be willing and able to come up with the difference between the sales proceeds (after the realtor’s commission, if any) and the mortgage payoff. If you and your spouse are unable or unwilling to come up with that amount of money, then you should discuss with your attorney the possibility of a “short sale,” where the lender accepts less money for your house than you owe. The final and least desirable option is a foreclosure. You should discuss these options in detail with your attorney.
8.9 What Is Meant by Equity in My Home?
The equity in your home is the value of the house less the mortgage balance(s).
8.10 How Will the Equity in Our House Be Divided?
If your home is going to be sold, the equity in the home will most likely be divided at the time of the sale, after the mortgage and costs of the sale have been paid.
If either you or your spouse will be awarded the house, there are a number of options for the other party being compensated for his or her share of the equity in the marital home. These could include:
- The spouse who does not receive the house receives other assets (for example, retirement funds) to compensate for his or her respective share of the
- The person who remains in the home agrees to refinance the home and to pay the other party his or her share of the
- The parties agree that the property be sold at a future date, or upon the happening of a certain event such as the youngest child completing high
As the residence is often among the most valuable assets considered in a divorce, it is important that you and your attorney discuss the details of its disposition. These include:
- valuation of the property
- refinancing to remove a party from liability for the mortgage
- the dates on which certain actions should be taken, such as listing the home for sale
- the real estate agent
- the costs of preparing the home for sale
- making mortgage payments
If you and your spouse do not agree regarding which of you will remain in the home, the court will decide who keeps it or may order the property sold.
8.11 If My Spouse Signs a Quitclaim Deed, Does That Remove His Obligation to Repay the Mortgage?
No, even if you agree to pay the mortgage, his obligation to the mortgage company ends only if you refinance or pay the mortgage in full.
8.12 Who Keeps All the Household Goods Until the Divorce Is Final?
The judge rarely makes any rulings regarding the personal property until after the trial, so the parties are usually on their own until then. If you move and take part or even all of the furniture, there is usually nothing the other party can do at that time. On this issue, like most divorce issues, you should try to protect your interests while remaining sensitive to the Golden Rule: If you act in an unfair or overbearing way, you are likely to create additional ill will with the other party, and to invite reciprocal behavior. And you need to remain aware of how your behavior will be viewed by the judge if the case is not settled and goes to trial.
8.13 How Can I Reduce the Risk That Assets Will Be Hidden, Transferred, or Destroyed by My Spouse?
Your spouse will be liable if he or she does anything improper with marital assets during the separation. Inventory what you can before the separation, including the contents of your safe deposit box, jewelry, guns, silver, and other collections of value. Prior account statements, loan applications, and financial or net worth statements provide a history of what you and your spouse have owned. Tax returns reflect all accounts that pay interest or dividends. Your divorce attorney can help you with any specific concerns you have.
8.14 When Are Assets Such as Cars, Boats, and Furniture Divided?
This can be done at any time by agreement. Otherwise, the judge will handle the division of all assets and debts as part of his or her ruling following trial.
8.15 How Do I Value Our Used Personal Property?
The standard is fair market value: how much the property would sell for if placed on the market. If the property is going to be allocated to one of the parties, the value can be agreed upon. If you can’t agree, then an appraiser should be hired if the personal property is of sufficient value to warrant this expense. There are appraisers available to value personal property, guns, jewelry, and coin collections.
8.16 How Detailed Should My List of Assets and Debts Be?
Your list should include each and every one of the following owned by you, your spouse, or the two of you jointly: real estate, significant items of personal property (cars, boats, and valuable collections), accounts (checking, savings, and stocks), retirement accounts and plans, business interests, other assets of value, mortgages, auto loans, credit card debt, and other debts (not including monthly expenses such as the electric bill).
8.17 What Happens to Our Checking and Savings Accounts During and After the Divorce?
Sometimes a party will take all of the funds from joint accounts. This is an aggressive act that typically guarantees a contentious divorce. The better option in most cases is to act in a thoughtful way with the expectation that the other party will reciprocate. But until you have a clear idea of how the other party is going to behave during the divorce, you do need to be careful to make sure you are not vulnerable. One option is to take one half of the funds from the joint accounts while communicating with the other party to make sure that joint expenses are fairly met. Try to work cooperatively with the other party on these early issues, as that sets the tone for how other issues will be resolved. A hearing can be held before a judge if a conflict develops that cannot be resolved by agreement.
8.18 How and When Are Liquid Assets Like Bank Accounts and Stocks Divided?
These accounts are often divided early in the process by agreement. If you cannot agree on the division, then the judge will divide and allocate these assets as part of his or her ruling following trial.
8.19 How Is Pet Custody Determined?
Virginia does not treat pets as being like children with the need for a custody and visitation ruling. Instead, in divorce cases animals are considered to be personal property to be allocated to one of the parties. In most cases, the spouse that has continued to care for a pet during the separation will be allocated the pet as part of the divorce.
8.20 How Will Our Property in Another State Be Divided?
As a general rule, the same classification and equitable distribution statutory factors apply to property without regard to the location of the property. Talk to your attorney about possible exceptions. For example, contracts and deeds are generally interpreted based upon the law of the jurisdiction in which they were made.
8.21 Are All of the Assets-Such as Property, Bank Accounts, and Inheritances-That I Had Prior to My Marriage Still Going to Be Mine After the Divorce?
These assets will be classified as your separate property if you kept them separate during the marriage. If you treated an asset as marital, for example by retitling into joint names, then the asset may have become either a marital or a hybrid asset.
If you are unable to agree on this issue, the judge will classify all assets as marital, separate, or hybrid. If these assets are classified as your separate property, then they will be yours after the divorce. The rules governing classification are highly technical, so any specific question you may have will have to be answered by an attorney well versed in Virginia equitable distribution law.
8.22 Will I Get to Keep My Engagement Ring?
Yes, if your spouse gave you an engagement ring prior the marriage, it is your separate property, and your spouse has no claim to it.
8.23 What Does It Mean to Commingle Property?
Assets with different classifications can be combined (for example, funds held in an account you had before the marriage can be added to a marital checking account), and that combination is referred to as commingling. The question then is how is the commingled account classified? The answer to this question depends upon the application of highly technical classification rules to the exact facts of your case.
8.24 Can I Keep Gifts and Inheritances Received During the Marriage?
This is another classification question. You will be able to keep gifts (not including those from your spouse) and inheritances received during the marriage if you maintained those assets as your separate property during the marriage.
8.25 If My Spouse and I Can’t Decide Who Gets What, Who Decides?
The judge decides following a trial.
8.26 How Are the Values of Property Determined?
Ideally, you and your spouse agree upon the value of property. If you can’t agree, then typically an appraisal is obtained if warranted by the value of the asset in dispute. Any unresolved disputes are determined by the judge following a trial.
8.27 What Does “Date of Valuation” Mean?
There is typically a one- to two-year gap from the date of separation until the divorce trial (for those cases that are not settled). During that time, some assets change in value. Virginia law requires the judge to use the value at the time of trial, or as close to trial as possible. An exception would be if one of you wasted assets during the separation. In that situation, the judge can select another date as the date of valuation.
8.28 If We Agree to, or the Judge Orders, an Equal Division of Our Assets, Does That Mean That Each One of Our Assets Has to Be Divided?
No, typically some assets are allocated to one party or the other, while others, such as liquid accounts, are divided. An equal division simply means that the total marital value of the assets allocated to you, less the debt allocated to you, equals the value of the assets allocated to your spouse, less the debt allocated to him or her. An equal division means that you and your spouse each receives one half of the net marital estate.
8.29 I Worked Very Hard for Years to Support My Family While My Spouse Completed an Advanced Do I Have a Right to Any of My Spouse’s Future Earnings?
Not as a matter of equitable distribution, though you may have a right to receive spousal support. Spousal support is discussed in chapter 10.
8.30 My Husband and I Have Owned and Run Our Business Together for Many Years. Can I Be Forced Out of It?
It depends upon how the business is owned. If the business is titled only to your spouse, then yes, you can be forced out. You will receive some credit for the value of the business, perhaps 50 percent. If it is titled only to you, then you cannot be forced out. If you and your spouse own the business jointly, then the court can order that one of you buy out the other. This is a complicated issue requiring legal advice based upon the specific facts of your case.
8.31 I Suspect My Spouse Is Hiding Assets, But I Can’t Prove How Can I Protect Myself If I Discover Later That I Was Right?
If you settle your case, make sure your settlement agreement:
requires full disclosure
identifies exactly what assets have been disclosed
specifies that you receive one half of any subsequently discovered marital assets
8.32 My Spouse Says I’m Not Entitled to a Share of His Stock Options Because He Gets to Keep Them Only if He Stays Employed With His What Are My Rights?
As a general rule, stock options are marital if they were earned during the marriage, but prior to the separation date. If they are marital, the judge can allocate a percentage of the value of the stock options to you. This can be a complicated issue requiring specific legal advice.
8.33 Will Debts Be Considered When Determining the Division of the Property?
Yes, specific debts are typically allocated with the related asset, if any. For example, if you receive a car, you will almost certainly be responsible for any debt secured by the car. In a more general way, the debts are considered in making the allocation between the parties. For an equal division, your assets less your debts will equal your spouse’s assets less his debts.
8.34 What Is a Property Settlement Agreement ?
A property settlement agreement between two divorcing spouses typically addresses most, if not all, of the issues in the divorce, including how the parties’ assets and debts are to be allocated and divided.
8.35 What Happens After My Spouse and I Sign the Property Settlement Agreement? Do We Still Have to Go to Court?
No, you have to go to court only if there are unresolved issues to be determined by the judge. You will still need a divorce order signed by the judge in order to complete the process and obtain your divorce, but that rarely requires a hearing.
8.36 If My Spouse and I Think Our Property Settlement Agreement Is Fair, Does the Judge Have to Approve It?
The judge cannot change your agreement regarding the division of assets and debts, or spousal support, so his or her approval is not required on those issues. The judge does have the power to reject or modify, after a hearing, any settlement terms regarding your minor children, though in practice it is relatively rare for a judge to not accept the terms negotiated by the parents.
8.37 My Spouse and I Have Agreed on How to Divide Our What Do We Do Now?
You should have an attorney assist you in preparing a settlement agreement to be signed by both of you. An oral agreement between you is not enforceable. After your settlement agreement has been signed by both of you, your attorney will assist you in obtaining a no-fault divorce.
8.38 My Spouse Is Guilty of Does That Mean That He Will Receive Less of the Property?
It depends upon whether the adultery was pre- or post- separation, other relevant facts, and the judge. Talk to your attorney about this question.
8.39 What, if Anything, Should I Be Doing With the Credit Card Companies as We Go Through the Divorce?
As a general rule it is a good idea to close joint credit cards. You will be unable to close accounts with unpaid balances. In that case you should consider sending a letter to the credit card company advising it that you do not agree to be responsible for any future charges. Keep a file copy of your letter.
8.40 How Is the Credit Card Debt Divided?
The credit card debt is usually allocated as part of an overall settlement of assets and debts. If you and your spouse cannot agree, then this issue is determined by the judge after trial as part of his or her equitable distribution ruling.
8.41 am I Responsible for Repayment of My Spouse’s Student Loans?
No, probably not.
8.42 During the Divorce Proceedings, am I Still Responsible for Debt My Spouse Continues to Accrue?
Potentially, yes, but usually not.
8.43 During the Marriage My Spouse Applied for and Received Several Credit Cards Without My knowledge. Am I Responsible for Them?
You are not responsible to the credit card company unless you signed an application or other document in which you accepted responsibility. The judge has authority as part of equitable distribution to allocate debt to you, even if it was incurred without your knowledge. An important issue would be what the debt was for (for example, credit card debt incurred to buy food for the children would likely be treated differently than debt for entertainment or dating).
8.44 My Spouse and I Have Agreed That I Will Keep Our Home; Why Must I Refinance the Mortgage?
You must refinance the home because if you didn’t, your spouse would remain liable for that debt. The debt would then show on his credit report if he later applies for a mortgage loan, and his credit rating would suffer if you ever became delinquent with your payments.
Can I File for Bankruptcy While My Divorce Is Pending?
You can, but be very careful to make sure that filing for bankruptcy protection is your best option and the timing is appropriate. You should receive advice from both your bankruptcy and your divorce attorneys before taking this step, as there are usually better options.