January 10, 2017
The Statute suggests that marital debt should be obvious, but do not forget the words “for the joint benefit of the husband and wife”, the Court of Appeals recently made that phrase a lot harder burden than we thought, see in Comstock v. Comstock, 771 S.E.2d 602 (N.C. App., 2015)
Home Equity Line of Credit (HELOC): Next, defendant argues that the trial court erred in its finding that the HELOC was defendant’s separate debt. We disagree.
Marital debt is “one incurred during the marriage and before the date of separation by either spouse or both spouses for the joint benefit of the parties.” Becker v. Becker, 127 N.C.App. 409, 414, 489 S.E.2d 909, 913 (1997) (citation and quotation marks omitted). The party claiming that debt is marital carries the burden of proof to show “the value of the debt on the date of separation and that it was incurred during the marriage for the joint benefit of the husband and wife.” Id. at 415, 489 S.E.2d at 913. (citation and quotation marks omitted)
Here, defendant alleged the HELOC was marital debt. There is no dispute that the HELOC existed on the date of separation in the amount of $38,938. Thus, the dispositive issue is whether defendant met his burden of showing that the debt was for the joint benefit of the parties. Defendant testified that plaintiff was aware of the HELOC and [w]e basically used them to live and build stuff around the house. I mean, we spent a lot of money at Lowe’s, I fixed things the way she wanted them, working around the house, in the yard…. [I]t was spent around the house…. [We] built a tree house for the boys in the back yard[.]
However, plaintiff testified that she was never aware that defendant acquired the HELOC, never signed the paperwork on the HELOC, and she only learned about the debt after they separated. She further testified that she did not know for what purpose defendant used the HELOC money.
After weighing the credibility of the parties’ testimony, the trial court, in its discretion, ultimately concluded that defendant failed to meet his burden and ruled that the debt was separate. The trial court’s finding on this issue was supported by competent evidence. Thus, the trial court did not err by finding that the debt was separate.
But see the Courts treatment in Alley v. Alley, No. COA02-594 (N.C. App. 11/4/2003) (N.C. App., 2003), in a earlier decision:
Plaintiff next argues that a $6,000 promissory note from both parties to Plaintiff’s parents, the proceeds of which were used to start up the Mailbox business, should have been classified as marital debt. We agree. Plaintiff’s equitable distribution affidavit classified the debt as marital and assigned it a value. His testimony at both the interim allocation hearing and equitable distribution trial reiterated the contents of his affidavit. A copy of the handwritten note, with both Plaintiff’s and Defendant’s signatures, was submitted into evidence. Defendant did not list the note on her affidavit, but at the interim allocation hearing, she admitted to signing the note. We see no evidence to the contrary. Based on the evidence and testimony at trial, the trial court erred when it failed to classify this note as marital debt of the parties, and assign it a value. For this reason, on remand the court must classify this note and, if marital, determine whether the debt and related interest or finance charges have increased since separation resulting in divisible property under G.S. . 50- 20(b)(4)(d), or whether payments have been made that are controlled by Hay, assign a value based on the evidence, and then incorporate its findings and conclusions into the final distribution, in its discretion.