Fifty-fifty obligation to bear debts in a community of property?
The main rule
Anyone who marries in the Netherlands without making any arrangements marries in community of property. Contrary to what the name suggests, the community of property includes not only the property but also the debts. In the event of a divorce, the main rule is that the property is divided equally and the debts are borne equally, unless different agreements have been made in the prenuptial agreement or in the divorce settlement. This follows from article 1:100 paragraph 1 BW. In practice, it appears that not everyone is aware of the fact that the debts of one person are also the debts of the other, let alone to foresee the consequences thereof. In the event of a divorce, (ex-)spouses can be faced with unpleasant surprises due to the main rule that debts are borne fifty-fifty, especially in the case of concealed, forgotten or unexpected debts. However, there are exceptions possible. In this blog I discuss the main rule and the possible exceptions to it.
Debts of the community
For the 'old' general statutory community of property, the legal regime that applies to people who married before 1 January 2018 without making a prenuptial agreement, in principle all debts of the spouses fall into the community. It does not matter in whose name the debts are and when the debts arose. However, private debts (for example a mortgage on a house that was paid with an inheritance obtained under an exclusion clause) and attached debts (debts of a highly personal nature such as compensation for committing a crime) do not fall into the community.
For the limited statutory community of property, the statutory regime that applies to people who marry on or after 1 January 2018 without making a prenuptial agreement, only the debts that arose during the marriage and the debts that the parties jointly incurred before the marriage fall into the community. Here too, it applies that private debts and related debts do not fall into the community.
Most culpable debts (for example a gambling debt, a traffic fine or a fraud debt) are in principle considered non-attached and therefore community debt. Debts that are incurred by one spouse without the knowledge of the other spouse are also usually included in the community.
Exceptions to the fifty-fifty contribution obligation
Until January 1, 2018
Based on established case law of the Supreme Court, a deviation from the main rule of the fifty-fifty obligation to contribute is not entirely excluded until 1 January 2018, but a deviation can only be accepted in very exceptional cases. A so-called 'heavy standard' applies. Until 30 March 2012, the judgment Murder marriage that 'very exceptional cases' were limited to cases of murder and manslaughter. The case law seems to have changed since the case of the Supreme Court on March 30, 2012 more to follow the line 'very exceptional, but everyday'. In this last case, the marriage lasted only one and a half years, the parties hardly lived together and did not have a joint household. The man incurred debts before the marriage, of which the woman was unaware. Furthermore, the man was unable to demonstrate that the funds for which the debts were incurred were used for joint expenses. The judgment of the Supreme Court shows that the circumstances of that case could justify a deviation from the main rule of the fifty-fifty obligation to contribute.
From January 1, 2018
The Supreme Court has ruled that the legislator intended to create a broader exception possibility for the dissolved community with a negative estate (i.e. if the assets of the community are insufficient to pay the debts of the community) with effect from 1 January 2018. Article 1:100 paragraph 2 BW entered into force on that date, which states:
“To the extent that, upon the dissolution of the community, the assets of the community are insufficient to pay the debts of the community, these shall be borne by both spouses, each in equal shares, unless the requirements of reasonableness and fairness, also in connection with the nature of the debts, give rise to a different obligation to pay.”
In short, it comes down to the fact that under the new rule a deviation will be allowed sooner than under the old rule. In addition, the question arises when the old or the new rule should be applied. The Supreme Court notes the following about this:
“The […] law does not provide for a special transitional rule for Article 1:100 paragraph 2 of the Dutch Civil Code. It must therefore be assumed that this provision applies from 1 January 2018 to the division of a matrimonial property regime that is dissolved after that date.”
The new rule therefore not only applies to communities that were created from 1 January 2018, but also to communities that are dissolved from 1 January 2018 (for which the moment of filing the divorce petition is important). Furthermore, as stated, the new rule only applies to a negative estate and it is therefore important to keep in mind whether there is a positive or negative estate.
Positive estate
If the assets of the community are sufficient to pay the debts of the community (positive estate), only in very exceptional circumstances (the heavy standard) can the fifty-fifty obligation to pay be deviated from. This means that the debt still remains a community debt, but the obligation to pay can be shifted entirely to one of the spouses. In this context, I will discuss four rulings that show that there really must be something special going on for there to be a deviation from the main rule of the fifty-fifty obligation to pay.
Arnhem-Leeuwarden Court of Appeal:
At the time when the parties were involved in a divorce and were no longer living together, the man had taken out a substantial loan – without the woman’s knowledge – from his sister. The man could not demonstrate that he had used the borrowed money for joint expenses, so the judge assumed that the woman had not benefited from the borrowed money. In these very exceptional circumstances, the man was fully responsible for the debts, according to the Arnhem-Leeuwarden Court of Appeal.
A few months before the divorce, the man made a substantial investment of €99,743 in total (consisting of, among other things, savings from the parties, a gift and a loan from his parents) in bitcoins from a dubious foreign provider. The woman knew nothing about it, neither about the loan nor about the investment. The man fell victim to so-called broker or boiler room fraud and lost his entire investment. Here too, the judge ruled that it was unacceptable by standards of reasonableness and fairness if the woman were to be liable for half of this debt.
The man and the woman were married in full community of property. As a result, the man's premarital study debt had become part of the community. Shortly after the marriage, the man had an accident, which resulted in him having to be cared for outside the home for a considerable period. The man did not complete his studies (which, according to the woman, would have been possible under the circumstances) and, once he had recovered, he went astray. In the court's opinion, there were no such exceptional circumstances that justified a deviation from the equal obligation to contribute.
The man and the woman married at a later age. Both had been married before and the man had to pay his ex-wife a large amount of spousal support. The second marriage also did not last. The man lost his job, became depressed and neglected his finances. At the time of the divorce, the man had a debt of more than €20,000 in connection with outstanding spousal support, of which he believed the woman should bear half. According to the court, the circumstances were not special enough to deviate from an equal distribution of the burden of support and therefore ruled in the man's favour.
Negative estate
The new rule as of 1 January 2018 means that the judge can more easily rule on a different division of the community debts. This is possible if and to the extent that the balance of the dissolved community is negative, namely where the requirements of reasonableness and fairness, also in connection with the nature of the debts, result in a different obligation to contribute. Referring to the legislative history does this concern i) debts that a spouse has incurred without the other spouse's knowledge or ii) debts that a spouse has incurred to make irresponsible expenditures. In this context, one might think, for example, of gambling debts or debts from a bank loan. A recent example of this broader exception possibility is the following ruling.
In this case it was established that the community was insufficient to pay the community debts. The woman argued that the man had incurred many debts without her knowledge and that the man had incurred the debts to make irresponsible expenditures. The woman did the regular administration, but the man concealed the other administration. This included traffic fines. In support of her position, the woman submitted, among other things, photos of postal items that she found in the basement of the marital home. The man stated that the woman had profited from the money, but could not substantiate this. This resulted in the court imposing a 100% obligation on the man to pay eight debts for a total amount of approximately €8,500.
Conclusion
The main rule of the fifty-fifty obligation to contribute can have far-reaching consequences for the spouse who did not incur the debt(s) themselves. Until 1 January 2018, it was only possible to deviate from the fifty-fifty obligation to contribute in very exceptional cases. After this date, there was a little more breathing space for the dissolved community with a negative balance.
However, it is important to keep in mind that the new rule has a limited scope. It only applies to the situation upon dissolution of the community and can only be applied if the assets of the community are insufficient to pay the debts of the community (negative estate). In other words, the new rule does not apply in cases before the dissolution of the community and if there is no deficit. Furthermore, it is important that debts of communities that were dissolved before 1 January 2018 are assessed differently under the new rule, if and to the extent that the community in question would have a negative balance. In all such cases, one falls back on the main rule of the fifty-fifty obligation to contribute, whereby deviation can only be assumed in the case of very exceptional cases (the heavy standard).
Customized advice
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