In family law disputes, especially during a divorce, it’s essential to properly divide both assets and liabilities. But defining common liabilities may often become problematic. Whether single handedly repaid debt during separation becomes an object of property division is a recurring concern and a topic worth addressing.
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General Legal Principles on Division of Debt
The legal basis for division of debt can be found in Article 839-2 of the Civil Act.
Article 839-2 (Claim for Division of Property)
(1) One of the parties who have been divorced by agreement, may claim a division of property against the other party.
(2) If no agreement is made for a division of property as referred to in paragraph (1), or if it is impossible to reach an agreement, the Family Court shall, upon a request of the parties, determine the amount and method of division, considering the amount of property acquired by cooperation of both parties and other circumstances.
The “division of property” in the second paragraph above includes not only positive property but also debt, which is negative property.
Debts subject to property division are, in principle, debts incurred for the common benefit of the couple during the marriage. Specifically, the following debts are subject to division:
- Debts incurred to create or maintain joint property: Debts incurred by the couple during the marriage to create or maintain joint property are subject to property division. For example, loans for purchasing a house, borrowings for living expenses, etc. are included.
- Debts for the common benefit of the couple even if there are no assets left by it: For example, if a couple borrowed money to buy a house, the debt is considered to be in connection with the formation and maintenance of joint property during the marriage and is therefore subject to property division, even if the house no longer belongs to the couple.
On the other hand, the following debts are excluded from the division of property:
- Debts incurred before marriage or after the breakdown of the marriage: Debts incurred before marriage or after the breakdown of the marriage are not, in principle, subject to division of property.
- Debt used for personal use: Debt used by either party for personal use is not subject to property division. For example, debt borrowed to pay for living with someone other than your spouse is not considered in property division because it is not related to the marriage.
Gil Dong’s Case: Repaying Debt Alone During Separation
One notable case, unfolding in 2021, involved a man named Gil Dong separated from his wife during the divorce proceedings. Gil Dong, working in the trucking industry, steadily repaid a heavy loan taken out in 2019 to purchase a truck.
Eventually, even before completely repaying his loan, the couple found themselves heading into a divorce lawsuit. Even as the litigation proceeded and they lived apart, Gil Dong continued to bear the burden alone. As time passed, the debt burden had significantly reduced by 2023, cut down to less than half compared to when the divorce proceedings began.
However, his wife demanded in 2023 that the asset division be based on this reduced debt. The argument here was whether the debt, which Gil Dong repaid alone post-separation, would be included in the property division in the event of the divorce.
Legal Perspective: Division of Debt Post Separation
In cases similar to Gil Dong’s, the supreme court maintains the following ruling:
1. The principle of property division during divorce primarily serves to surmount the individual property system of the Civil Act and equitably distribute the property accrued jointly during the marriage. Regardless of the property title, it divides based on actual contribution to the property’s formation and upkeep. Even if the debt was borne by one party against a third party, if it was required for forming joint property or maintaining a joint family-life, it deserves to be the object of property division.
2. Primarily, property and its value subject to division in a litigation divorce are determined based on the fact-finding trial closing date. However, post-marital discord, if the change in property dynamics is due to the unilateral effort of one party and unrelated to the jointly formed property, it is excluded from division.
3. Therefore, if the debt subject to property division has reduced between the rupture of the marital relationship and the closing of the trial, and that reduction occurred independently of common marital property and due to one person’s unilateral efforts or costs, then that decrease is not treated as a part of property division.
In Gil Dong’s case, the court ruled that the reduction in debt was not a part of marital property and hence, would not stand as an subbject for property division.
Is this ruling entirely definitive? Not necessarily. It’s crucial to remember that each case carries its unique characteristics and circumstances that the court will consider. Legal regulations and precedents are subject to change and their interpretations may shift based on the specifics of each case.
_The reference date: August 16, 2024_
_Reference case: Supreme Court, 2024. 5. 17, Decision 2024-Div-10721 (original case), 2024-Div-10738 (counter case)_
_Please note that the information may have changed after the date of writing and the interpretation of the law may vary in different cases._
Considering a Divorce?
Divorce and asset divisions could be complex, personal, and emotionally challenging. Make sure to consult with a qualified expert, especially if you need to understand technicalities like dividing debts during separation. Taking individual circumstances into account will ensure that you get fair justice, as did Gil Dong.
If you would like to know more about property division in divorce, the links below may be helpful.