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What Happens to Debt in a Morris County Divorce?

Debt and Divorce Attorneys Morris County NJ

Living in America is expensive. Not many know that better than the people of Northern New Jersey who reside in counties such as Morris, Bergen, Somerset and Essex; these places rank as some of the most expensive places to live in all of the United States. Most of us go into debt for our cars, our houses, our education, even day to day expenses like clothes and food.  One of the most common questions asked when starting the divorce process is “What happens to our debt if we get a divorce?”.  There is no definite answer, much of it depends on having experienced litigation to negotiate the best deal possible, but below are some guidelines to help give you an idea what to expect.

When a New Jersey divorce court is faced with the question of debt, it must determine three things:  

  • The existence of the debt
  • The nature of the debt i.e. Is the debt shared between spouses or was it accrued as individuals?  And finally,
  • How to allocate the debt (This is the step where having a Morris County Divorce Lawyer is extremely important).

Existence of Debt

Proving the existence of the debt is fairly simple.  Ask your bank for copies of your statements, get copies of your credit card statements, and copies of loan agreements and any other applicable documents showing what the debt was for, when the debt was incurred and by whom.

Nature of the Debt

As mentioned before, there are two kinds of debt in respect to dividing debt in a divorce: Marital and Non-Marital.  Marital debts are somewhat self-explanatory, but not always so easily categorized during the divorce process, again an experienced Morristown Divorce attorney can potentially save you large sums of money during this process.  In New Jersey marital debt is the legal term for any financial obligations acquired to cover household expenses or debt acquired during the marriage.  

Non-Marital debt is considered to be debt accumulated before the marriage began or after the parties separated or divorced, as well as debt incurred for items unrelated to the household of the marriage.  Additionally, any debt from inappropriate or illegal activity is also considered to be non-marital debt.  

Non-marital debt is never assigned from one party to another in a divorce, it belongs strictly to the party who initially accrued it.  Often, non-marital debt is paid with whatever marital assets are awarded at the end of the divorce process.

Allocation of Debt

Debt and Divorce Attorneys Morris County

Once the existence and the nature of debts has been determined, a divorcing couple will come to terms regarding any marital assets and existing marital debts.  It is at this time that your counsel should draft an “indemnification agreement”.  This is an extremely important document which protects you from your spouse defaulting on payments they are required to make by the courts.  In other words, even if as part of your divorce negotiations your spouse agrees to take on paying a specific loan, the creditors are not bound by the court’s order, and as such can come after you for a payment your spouse is supposed to make!  This is why it is highly recommended that you use divorce assets to repay your marital debts.  If you are unable to do so however, an indemnification agreement basically states that your spouse is obligated to pay you for whatever amount you have paid to creditors in order to cover their defaulting of payment.


Contact Our Whippany NJ Divorce Attorneys for a Free Consultation

Clearly, division of assets and debt in a divorce is a complicated process.  If you are currently considering or undergoing a divorce, please contact the experienced team of attorneys at Townsend, Tomaio & Newmark LLC today to schedule a consultation. Call us at 973-840-8970