Marriage has legal significance and is different from common law relationships. There are certain protections in the law afforded married couples that are not directly available to unmarried, cohabitating individuals. One special category of protection is the "matrimonial home" which, in a marriage, is considered as 50% owned by each of the marriage partners regardless of financial input.
The institution of marriage is comprised of rights and obligations, and expectations. Regarding the matrimonial home, one of the "rights" obtained through marriage is the 50% ownership of that property. Regarding "obligations," there is the expectation that each partner will support the other both emotionally and financially. Marriage, therefore, is comprised of both instrumental and expressive exchanges - financial support and emotional support.
Unfortunately, the legal rights and obligations of each partner to the other do not always align themselves with the emotionally-based expectations of the partners in the marriage. There is an emotional expectation based in trust that the other partner will be responsible for his or her actions and consider the other at every step, including in financial matters.
The fact is that if one partner in a marriage incurs debts and the marriage dissolves, those debts are deducted from the value of the property that the partners own jointly on the date of separation. So, the impact on the family property overall is that the joint property is diminished by the one party's poor spending habits.
A very large risk is that the partner in heavy debt may declare personal bankruptcy to deal with that debt. The bankrupt partner will include his or her mortgage debt in the bankruptcy. When the mortgage on the matrimonial home is guaranteed by both parties in the marriage, as it very often is, the bankruptcy shifts the entire responsibility for the mortgage on to the innocent party, that is, the party who did not become debt-laden and bankrupt. The mortgagee will pursue the innocent, non-bankrupt partner for the entire mortgage debt, which often drives that innocent partner into bankruptcy as well.
Importantly, the bankruptcy does not extinguish the bankrupt's right to either possession of the matrimonial home, or to any equity in it if it is sold, although the bankruptcy trustee collects this money. The Family Law Act requires that both partners to the marriage consent to the selling of the home, which sale could be the only way in which the innocent partner can avoid bankruptcy. When the bankrupt partner disappears, or is uncooperative in providing that consent, that person can actually cause the bankruptcy of the innocent party. The bankruptcy trustee does not have the right to consent to the sale in the bankrupt's stead. As you can see, in this circumstance, it is possible for the bankrupt individual to use the Family Law Act to abuse the partner economically by forcing a bankruptcy on him or her. Obviously, this is not the intention of the Family Law Act, but it is a potential unintended consequence of the law.
Married partners should watch the financial activities of their partner and ensure, as best they can, that the other does not incur large debt. As stated, it not only diminishes the property held by the couple to be divided on dissolution, if that should occur, but can actually lead to the bankruptcy of the innocent partner who is unaware, or condones, the excessive indebtedness of the partner who chooses to go bankrupt.
There are ways to deal with this problem that can save the innocent partner from bankruptcy. Given the complexity of the solution(s), however, it is highly advisable that a lawyer be retained to resolve the issue.
Bryan Embree is an associate at the law firm of Cobb & Jones LLP