How Do I Handle Joint Debts During A Divorce?

When you and your spouse get married, you’ll find that the overwhelming majority of your life will become intertwined with theirs. As such, going through a divorce can be incredibly complicated, as you’ll find that separating your lives can be challenging. One aspect that is incredibly contentious is the division of property during a divorce, as you’ll find that joint debts are included in this process. As such, understanding how the New Jersey courts handle the division of debt in a divorce is critical to preparing your post-divorce finances. Our Morristown property distribution attorneys can tell you how this might work and how you can negotiate for a fair divorce agreement.

What Is Equitable Distribution in New Jersey?

In New Jersey, the divorce courts are responsible for dividing all marital property in accordance with the equitable distribution standard. As such, the court must divide both assets and debts utilizing this standard. Essentially, equitable distribution means the court does not automatically divide assets equally among the spouses, but rather fairly, based on each spouse’s financial situation, earning capacity, and contribution to the marriage.

Key Factors Considered by the Courts

Length of the marriage
Income and earning capacity of each spouse
Age and physical/emotional health of each spouse
The standard of living established during the marriage
Financial and domestic contributions to the marriage
Current alimony or child support orders
Tax consequences

When Are Debts Considered a Marital Debt in New Jersey?

In general, any debt accumulated during the marriage is presumed to be marital debt, even if it only exists in the name of one spouse. This is because the accumulation of assets and debts after marriage is assumed to belong to both spouses. As such, this includes credit card debts, vehicle loans, personal loans, home mortgages, and even some business debts. Classification, however, will depend on the purpose of the debt and how it was utilized.

It is important to understand that the courts in New Jersey will also examine whether a spouse engaged in the intentional “dissipation” of marital assets when accumulating debt. Essentially, this means one spouse has spent marital funds or accumulated debt for actions unrelated to the marriage, like gambling, affairs, or reckless personal spending. This helps ensure one party is not liable for financial misconduct that did not benefit them, as the spouse may allocate this debt to the party responsible for incurring it.

Common Types of Marital Debts

Joint credit card balances accumulated during the marriage
Mortgages on the shared home
Auto loans for cars used by the family
Home equity lines of credit
Business debts incurred during the marriage
Medical expenses
Personal loans used for household expenses

What Is Considered Separate Debt?

It’s necessary to understand that not all debts are subject to equitable distribution during a Morris County divorce, as some may constitute separate debt. This generally includes liabilities incurred prior to the marriage or after the date the divorce complaint is filed with the court. It’s important to understand, however, that commingling of debts or utilizing marital funds can impact the classification of debts in a divorce.

Examples of Separate Debt

Student loans taken out prior to the marriage
Credit card balances accumulated before the marriage
Loans taken out after the separation
Gambling or excessive debts unrelated to marital benefits
Debt tied to inheritances or gifted separate property

It’s important to understand that, in instances where one spouse’s reckless spending that does not benefit the marriage accumulates a large amount of debt, the court may assign that debt solely to the spouse responsible for incurring it.

Can I Be Responsible for My Spouse’s Credit Card Debt?

In many instances, yes, you can be liable for the debt accumulated by your spouse, even if your name is not on the credit card account. This is because debts incurred during the marriage are generally treated as marital property. However, the court must evaluate whether the spending benefited the household or was strictly personal and excessive.

Factors Considered by the Court When Allocating Individual Debt

Whether the debt contributed to household living expenses
Whether both spousesknew about and approved the debt
Whether the debt provided a marital benefit
Whether one spouse engaged in the dissipation of marital assets
Whether fraud or concealment occurred

How Do New Jersey Courts Determine How to Divide Debt?

In the event a divorcing couple in Morris County cannot reach an agreement on how to handle the division of debt, the matter will be decided by the Superior Court of New Jersey, Family Part. The judge assigned to the case will consider financial disclosure, evidence, and potentially the testimony of expert witnesses before assigning debts to each spouse. The court has broad discretion to offset debt through the awarding of assets, adjusting allocations based on income differences, and including protections in the final judgment.

Procedural Steps in Debt Division

Each party submits a Case Information Statement providing a comprehensive overview of their income, assets, and debts
Financial documents, like credit card statements, bank accounts, and loans, are analyzed
Mediation may be ordered by the court to attempt to reach a settlement
The court will adhere to statutory factors when determining the equitable distribution of debts
Judges can offset the allocation of debt by awarding assets
Final allocations will be detailed in the divorce decree

Is It Better to Negotiate or Proceed to Court?

In general, litigation is often a time-consuming, tedious, and expensive process, which is why many couples in Morris County opt to mediate or negotiate the allocation of debt during their divorce. This provides more flexibility and allows for different solutions that may not be considered by the courts.

Alternatives to Litigation

Court-sponsored mediation
Private mediation with financial experts
Collaborative divorce resolutions
Structured sale of assets to pay joint debts
Refinancing debt in the name of one spouse
Indemnification clauses to protect against non-payment

What Happens if My Ex Does Not Pay a Debt Assigned to Them?

Unfortunately, though your divorce decree may assign a debt to your spouse, if your name is also on the account, creditors are not bound by that order. As such, they may pursue you for payment, making proactive financial planning during divorce imperative.

Steps to Consider

Close joint accounts during the divorce
Remove your spouse as an authorized user
Refinance joint loans
Monitor credit reports
Include indemnification in settlements
Seek enforcement if your spouse violates the court order

Meet With Our Experienced Family Law Attorneys

If you are concerned that joint debts will be a sticking point in your divorce or you’re worried that your spouse will try to push responsibility for their own debts onto you, you need a lawyer. Contact Lazor Rantas, PC to schedule a consultation and learn more about how we can help you deal with joint debts and ensure that you are treated fairly.