When a couple decides to get married, they agree to join their lives together. This generally means combining assets. Unfortunately, it may also mean taking on your partner’s debt. When a divorce occurs, both assets and debts will have to be divided between the two parties. You may be wondering how this works. Read on for more information regarding the division of debt in a New Jersey divorce.
How Are Debts Split in a New Jersey Divorce?
It’s important to understand that, when a couple divorces, it is not only their property that is split among them during a divorce. Instead, you’ll find that debt is also subject to division. One of the most important factors is not the name on the bill or card in question, but rather when and why the debt was accrued.
Under New Jersey Law, assets and debts are divided in accordance with the equitable distribution standard.
Equitable Distribution vs. 50/50 Split
In New Jersey, equitable division divides assets and debts based on what is fair and just. It is important to note that the term is “equitable,” not “equal.” It is important to understand that, generally, debts and assets will not be split down the middle. Instead, they will be divided based on what is fair.
Separate vs. Marital Debts in a NJ Divorce
When determining the division of assets, the court will examine the debts incurred throughout the marriage. Some debts will remain separate, while others will be considered marital or joint assets.
What Is a Separate Debt?
A separate debt is any obligation that will remain the responsibility of the spouse who incurred the debt. These generally include debts acquired before the marriage or ones that clearly only benefit a certain spouse. Examples include:
- Student loans taken out prior to marriage
- Credit card debt accrued while dating
- Debts not related to the marriage or family (secret spending that does not benefit the household)
It’s important to understand that the classification of debts is fact-specific, and the court will examine whether the debt was incurred for the benefit of the marriage when deciding how to classify a debt.
What Is a Marital (Joint) Debt?
Marital debts represent any debt acquired after a couple is legally married that benefits the household. This is true even if only one spouse’s name appears on the account or title. Common marital debts include:
- A mortgage used to buy the family home
- A home equity loan to renovate a family property
- A car loan for a vehicle used by both parties
- Join credit cards for household purchases
- Medical bills for a spouse or child
Common Debts in an NJ Divorce
There are many debts that commonly arise during a Morris County divorce, like:
- Mortgages
- Auto loans
- Credit Card balances
- Personal loans
- Medical bills
- Business debts
- Tax debts
How Do NJ Courts Determine Who Pays Which Debts?
Once a court is able to classify debts into marital and separate debts, all marital debts are subject to distribution under New Jersey’s equitable distribution statute.
Equitable Distribution Factors
The division of debt is an important decision to make. As a result, there are several specific factors that New Jersey courts consider when dividing debt in a divorce. This includes the following:
- The duration of the marriage
- The age, physical health, and emotional health of each party
- Any income or property brought into the marriage
- Both parties’ standard of living
- Written agreements made either before or during the marriage (prenups or postnups)
- Both parties’ economic circumstances after the division of property
- Both parties’ income and earning capacity
- Any contributions made by one spouse to the other’s ability to earn income
- Any contributions made that increased or decreased the value of the couple’s marital property
- The tax consequences of the proposed property distribution
- The present value of the property
- The need of a custodial parent to use the marital home
- The parties’ debts and liabilities
- The need for a trust fund to pay for the medical or educational costs of a spouse or child
- Any delay incurred by one party in achieving his or her career goals
- Any other factors which the court may deem relevant
Examples of How a Debt May Be Split
There are different ways in which the court may divide debts between spouses. For example, one spouse may be awarded the marital home and mortgage payment, while the other receives a larger share of liquid assets and fewer debts. Similarly, a joint credit card can be divided in a manner that reflects each spouse’s income.
What Happens to Joint Debts?
While the court may assign one debt to a certain spouse, the contract you signed with a lender may have both names listed on the account as a joint debt. It’s important to understand that creditors are not part of the divorce and therefore do not need to abide by a court order. As such, if your spouse, who is ordered by the court to pay a debt, fails to do so, the creditor can still pursue both of you for payment as long as your name is on the account.
How Can I Protect Myself?
- Obtain a list of all debts before the divorce
- Close or freeze joint accounts when possible to prevent new charges
- Refinance joint loans into one spouse’s name if they are keeping the asset
- Use property sales or equity to pay off joint debts before the divorce is finalized, if possible
- Ensure that your decree clearly explains what will happen in the event that a debt one spouse is responsible for is not paid
- Monitor your credit regularly and dispute errors that arise
CONTACT OUR FIRM
A divorce is a difficult process, and it is important to have the right legal time on your side. At Townsend, Tomaio & Newmark L.L.C., our firm is here to fight for you and ensure that your divorce is fair and just. Contact our firm today to speak with an experienced and dedicated attorney. We are here to advocate for you and walk you through the process every step of the way. When you need an experienced legal team to guide you through your divorce, contact Townsend, Tomaio & Newmark L.L.C today.
