If you’re divorcing, you may be worried about paying large bills like a mortgage or car loan. Fortunately, under divorce law, expenses like these generally remain joint obligations and neither of you can walk away from your financial obligations. Your finances are protected by the automatic orders rule. Without this rule, you would have to ask the court to order your spouse to pay his or her share.
What Is the Automatic Orders Rule?
The automatic orders rule temporarily protects the parties’ finances by maintaining the status quo with respect to various financial matters. It is triggered by the filing of the divorce action and service of the summons and continues to operate until all financial issues are resolved by mutual agreement or by court order.
Under the rule, neither of you can sell assets, empty bank accounts, frivolously spend money or waste assets. You cannot incur unreasonable debt or encumber marital assets, although you should continue to pay customary or usual household expenses. Insurance coverage cannot be changed or dropped and ordinary expenses to maintain marital property must be paid.
There are two exceptions to the rule. You can use marital property to pay reasonable fees for a divorce attorney as noted above and you can change your will provided it doesn’t eliminate your spouse’s right to an elective share of your estate.
Does the Rule Apply to Mortgage or Car Loan Payments?
A mortgage on a home acquired during the marriage is a joint obligation of the parties. As such, it must be paid as an ordinary expense to maintain marital property, the same as real estate taxes, utilities, necessary repairs and other costs. Similarly, a car loan acquired during the marriage would fall under the automatic orders rule unless it can be shown that the liability is individual to one party.
What If Your Spouse Doesn’t Pay?
You can go to court to enforce the automatic orders rule. The judge can issue an enforcement order, hold your spouse in contempt and order imprisonment (rarely done).
What Happens After Divorce?
As part of the divorce process, you or your spouse will continue to assume each liability. Typically, once the property settlement is reached, the party who gets the asset is responsible for the liability. Thus, whoever receives the house takes over the mortgage and the one who gets the car is responsible for the car loan.
Alternatively, you can sell the property and pay off the loans. If the property is worth less than the amount owed, you and your spouse will have to decide how to satisfy the debt. Generally, debts independent of any assets are paid from marital assets before the assets are divided between the parties.
The automatic orders rule helps ensure that neither spouse can avoid their financial obligations or squander assets.
If you are considering a divorce, contact us to help you get the best result possible in your divorce.
