4 Factors How to Divide Marital Debts in Tennessee Divorce

Tennessee law case summary on property and debt division in Tennessee divorce and family law from the Supreme Court of Tennessee.

Alford v. Alford, 120 S.W.3d 810, No. E2001-02361-SC-R11-CV (Tenn. 2003).

As the Supreme Court of Tennessee noted at the beginning of its opinion, Mr. and Mrs. Alford had an unusual marital history:  they married on November 2, 1979 and remained married for more than 20 years, but spent half of that time living apart, separating in 1989.  After the separation, Mrs. Alford filed for divorce in 1990, but withdrew the divorce complaint.  The parties agreed to remain married “in name only” for their only daughter’s sake.

Mr. Alford then filed for divorce in July 1999, and the trial was held in January 2001 with a final judgment entered in April of that year.  Mr. Alford was granted a divorce on the grounds of inappropriate marital conduct—specifically Mrs. Alford’s “deception in joint financial matters.”  At trial, the court found that she had—without Mr. Alford’s knowledge or consent—acquired a $10,000 second mortgage on the family home.  In addition, after the action for divorce was filed, Mr. Alford learned that Mrs. Alford obtained credit cards in his name, made substantial charges, and subsequently defaulted on the payments.

On appeal, the Tennessee court of appeals relied upon Mondelli v. Howard, which stated that in dual property jurisdictions like Tennessee, the courts will distinguish between marital and separate debts and divide only the marital debts.  Marital debts are defined as debts incurred during the marriage for the joint benefit of the parties or the acquisition of marital property.  Mondelli listed four factors to be used for dividing marital debt between the divorcing spouses:

1. the debt’s purpose;
2. which party incurred the debt;
3. which party benefitted from incurring the debt; and
4. which party is best able to repay the debt.

With those factors considered and the evidence at trial, the court of appeals decided that the debts were properly classified by the trial court as marital in nature.

The supreme court rejected the analysis of the court of appeals to the extent that it requires a trial court to engage in a preliminary determination of whether debt incurred during a marriage is marital or separate based on a “joint benefit” test. The supreme court thought that such a test would create confusion and difficulty in determining what debts would meet the standard.  The “joint benefit” test requires trial courts to go through a difficult and unnecessary inquiry, and the supreme court declined to adopt that analysis.

Marital debt is not defined by the Tennessee statutes, nor had it been defined by the supreme court.  Nonetheless, the supreme court held that marital debts are subject to equitable division in the same manner as marital property, and set out to define the term “marital debt” to be consistent with the definition of “marital property” in Tennessee:  “Marital debts” are all debts incurred by either or both spouses during the course of the marriage up to the date of the final divorce hearing.”  As such the debts incurred by Mrs. Alford are marital because they were incurred during the course of the marriage. Absent a distribution of property in a decree of legal separation, a period of separation before divorce does not have an effect on the classification of debt as marital or separate— separated parties are still married.

The supreme court explained that it was clear that Mrs. Alford incurred the debts and that Mr. Alford was the party best able to repay those debts; however, there was insufficient evidence to indicate the purpose of the debts or which party benefitted from incurring the debt. Because of these missing answers, the supreme court sent the case back to the trial court to hear more evidence and to determine how the marital debts were to be allocated between these parties.

Spouses who wish to legally separate and have their property divided without divorce can do so. Tennessee statutes say that when there is a petition for legal separation, the court may make a final disposition of the marital property, either at the time of entering an order of legal separation or at the time of entering a final divorce decree, if any.  If the marital property is divided as part of the order of legal separation, any property acquired by a spouse after that point is said to be separate property of that spouse.  Because the supreme court defined marital debt to correspond with the statutory definition of marital property, it followed that debt would be separate if it was incurred after an order of legal separation that included a final property division.

Alford v. Alford, 120 S.W.3d 810, No. E2001-02361-SC-R11-CV (Tenn. 2003).

See original opinion for exact language.  Legal citations omitted.

For more information on Tennessee property division in divorce laws, debt division, and equitable distribution, see Tennessee Property Division Divorce Laws & Factors | Answers to FAQs and the Tennessee Property Division Video Series.

Memphis divorce lawyer, Miles Mason, Sr., JD, CPA practices family law exclusively and is founder of the Miles Mason Family Law Group, PLC, which handles Tennessee family law matters including divorce, child support, alimony, prenuptial agreements, child custody, parental relocation, child support modification, alimony modification, and divorces including business valuation and forensic accounting issues.