Divorce is never easy, and dividing up what you and your spouse owe can be one of the most challenging parts. When couples separate in New Jersey, they must not only decide how to split their assets but also handle their debts. Whether the debt is in the form of loans, credit cards, or other expenses, both parties need to understand how to fairly manage it during a divorce. Let’s explore what marital debt is, how it’s divided in New Jersey, and the steps you can take to handle it. At, Tanya L. Freeman, Attorney at Law , we are here to guide you through the legal process and help you navigate the complexities of your case.
Understanding Marital Debt
When couples decide to part ways, they have to separate what is known as “marital debt.” Marital debt refers to any money owed that was built up during the marriage. This debt can include credit card balances, mortgages, car loans, and even student loans. In New Jersey, marital debt does not mean every single debt owed by either spouse, but only those that were taken on together or used for the benefit of the marriage. For instance, if one spouse had a large amount of credit card debt before the marriage and used it for personal expenses, that debt is usually not considered marital debt. On the other hand, if both partners used a credit card for household items, that debt could be seen as marital.
The key to understanding marital debt is to know which debts were taken on for joint use. This helps both spouses understand what will likely be divided between them. It’s essential to make a clear list of all debts and figure out which debts fall under “marital” and which ones are “individual” since this will help both parties know where they stand.
How New Jersey Divides Marital Debt
New Jersey follows the principle of “equitable distribution” when it comes to dividing assets and debts. Equitable distribution does not mean that everything is divided equally down the middle. Instead, the court looks at several factors to make a fair split. The same principle applies to marital debt. While some states may split debts in half automatically, New Jersey considers the circumstances and needs of both parties.
For example, the court might look at each spouse’s income, age, health, and contributions to the marriage. If one spouse has a higher income, the court may assign a larger portion of the debt to that person. However, this does not mean that the higher-earning spouse is always responsible for more debt. Instead, the court tries to be fair based on the couple’s situation and ability to pay.
More than an accomplished divorce and family law attorney, Tanya L. Freeman, is a consummate professional with a wealth of corporate and life experience. Known as a leader and strategist, Tanya L. Freeman was appointed by the Governor of New Jersey as Chair of the Board of Directors of the University Hospital in Newark, New Jersey. Tanya L. Freeman also presents among the ranks of public speakers. She captivates and inspires professional groups nationwide. "Tanya has the eloquence and oratory brilliance with the ability to forge deep connections with her listeners."
Tanya L. Freeman, Attorney at Law
Managing Partner of the Family Law Practice at Callagy Law
Another important point is that if one spouse incurred debt for personal reasons, the court may assign that debt solely to them. For example, if a spouse used a credit card for a personal hobby or luxury items not used by both parties, that debt might not be shared. The court’s goal is to divide the debt in a way that makes sense for both parties.
Preparing for Debt Division in Divorce
If you’re facing divorce and have joint debts, you can prepare by gathering information. Start by getting copies of all financial statements, including credit cards, loans, and mortgages. This will help you understand the total amount owed. Next, try to remember which debts were used for the marriage and which were personal. By doing this, you’ll have a clearer picture of what might be divided and what might be kept separate.
You and your spouse may also want to sit down together and talk about these debts if possible. Some couples are able to reach agreements on debt division without the court’s help. If you can agree on who will take responsibility for each debt, this can save both time and money in court. However, if you and your spouse cannot agree, the court will decide for you, and the decision may not be what either of you expected.
It’s also helpful to think about closing any joint accounts. During a divorce, each spouse should protect their credit by closing joint credit card accounts or removing themselves as an authorized user. This can prevent one spouse from adding to the debt, which can complicate matters.
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Factors Affecting Debt Division
New Jersey courts take into account various factors when dividing debt between spouses. The court may look at each spouse’s income and earning potential. If one spouse has significantly more earning power, they may be assigned a larger share of the debt. This is to ensure that each party can reasonably manage their share.
The court also looks at each spouse’s contributions to the marriage, both financially and non-financially. If one spouse stayed home to take care of the family, they might not have as much income. In these cases, the court may assign less debt to the spouse with lower earnings. The length of the marriage is also a factor. In longer marriages, debts are more likely to be split equally since both spouses have contributed over time. For shorter marriages, debts might be divided differently since there was less time for joint financial commitments.
Another factor is each spouse’s health and age. If one spouse is older or has health issues, they may be assigned less debt to reduce financial stress. The court tries to consider the best interests of both parties to reach a fair outcome.
Debt Responsibility After Divorce
Once the divorce is finalized, each spouse is responsible for the debts assigned to them. However, just because a court order says one spouse must pay a certain debt doesn’t mean creditors will honor that division. Creditors view debts as joint if both names are on the account. For example, if both spouses signed a credit card or mortgage, both remain legally responsible to the creditor, even if the court orders only one spouse to pay.
If one spouse fails to pay a debt assigned to them, the other spouse’s credit could be affected. For this reason, it is sometimes better for couples to agree to pay off joint debts before the divorce is finalized. This way, they can avoid future conflicts over unpaid debts and keep their credit intact.
Refinancing is another option for dealing with joint debt. For example, one spouse may choose to refinance a mortgage into their name, which removes the other spouse from responsibility. This option requires qualifying for a new loan, so it may not work for everyone.
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Common Types of Marital Debt in Divorce
Marital debt can come in many forms, and the type of debt can affect how it is handled. Mortgages are one of the largest types of marital debt and are often handled through selling the home or refinancing. If neither spouse can afford the mortgage alone, the court may order the house to be sold and the proceeds used to pay off the debt.
Credit card debt is also common in divorce and can be more difficult to handle. Credit cards often have high-interest rates, and they can be jointly or individually held. Courts will look at how each spouse used the cards to determine a fair division.
Car loans are another type of debt commonly seen in divorce. If one spouse plans to keep the car, they may be responsible for the car loan. However, if the loan is in both names, refinancing may be necessary.
Tips for Managing Marital Debt in New Jersey Divorce
When managing marital debt, it’s crucial to communicate with your spouse about who will take on which debts. If both parties can agree, it can make the process smoother. However, if you cannot reach an agreement, the court will help divide the debt based on fairness. As a precaution, try to pay off joint debts before finalizing the divorce. This can help prevent future issues and protect both parties’ credit.
Also, consider the long-term effects of debt division. While it may seem simple to divide debts equally, the reality is that your future finances will be affected. Take time to review the debts and consider what you can realistically handle.
Finally, stay organized and keep copies of all documents related to debt. This includes statements, loan agreements, and any written agreements with your spouse. By staying organized, you’ll have the information you need if issues come up later.
Protecting Yourself with Legal Help
Navigating marital debt during a divorce can be complex, and it’s easy to feel overwhelmed. A legal professional can provide guidance tailored to your situation and help you understand your rights. With the right advice, you can avoid potential pitfalls and reach a fair division of debt that considers your needs.
In New Jersey, having the support of a law firm with knowledge of divorce and marital debt can make a significant difference. The firm can assist in negotiations with your spouse or represent you in court to ensure that your interests are protected. Every debt situation is unique, so having a professional on your side can help you make informed decisions.
If you are facing divorce and dealing with marital debt, you don’t have to handle it alone. Contact Tanya L. Freeman, Attorney at Law, for experienced guidance through this challenging process. With support and knowledge on your side, you can work toward a fair division of debt and protect your financial future. Reach out today to start taking control of your situation.