DiLorenzo & Rush | Counselors of Law
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How is debt divided in New Jersey divorces?

On Behalf of | Mar 20, 2023 | Divorce

In many instances, financial stability is at the heart of divorce proceedings. While many individuals focus on acquiring as much as they can through the property division process and accessing spousal and child support, you can’t overlook the role that debt can play in your marriage dissolution. Even if you’re able to secure a large portion of the marital estate, it may mean little if you also end up saddled with debt.

That’s why it’s important that you know how debt is divided in divorce and figure out the best way to handle it under your unique set of circumstances. Hopefully then you can move onto the next chapter of your life with the financial security that you need.

How is marital debt divided in New Jersey?

Under New Jersey law, as with marital assets, marital debts are supposed to be divided in an equitable fashion. This doesn’t mean that these debts will be divided equally. Instead, the court will look at the circumstances and determine what sort of debt division is fair. To make this determination, the court is free to consider a number of factors, including the income and earnings capacity of each spouse.

While those are key considerations, the court has the ability to consider anything that it deems relevant to its determination. Therefore, even issues like poor money management during divorce, gambling, and the squandering away of marital assets may have an impact on how debt is divided. Which spouse ends up with primary physical custody may also play a role.

What about individually held debt?

Figuring out which debts are marital in nature can be trickier than anticipated. Generally speaking, debts that are taken on for the benefit of the marriage are considered marital debts that will be fairly divided. Yet, sometimes there’s dispute as to whether certain debt was taken on for the benefit of only one spouse. Therefore, you’ll want to carefully analyze the facts surrounding all debt accumulated during your marriage to see if there’s a way to argue that its marital or individual, whichever best supports your interests.

How common marital debts are handled

As you navigate your divorce, you’re likely to face some common debt challenges. Here’s how some of them are typically handled:

  • Credit card debt: Jointly held balances are often evenly divided, whereas individually held accounts will require a closer look. However, these debts are usually divided evenly unless it’s clear that the debt was taken on in an individual capacity.
  • Mortgage: Many family homes are sold during divorce, allowing the spouses to divide the proceeds. But if you or your spouse is going to keep the home, then the spouse who retains that asset will take legal steps to assume the mortgage.
  • Vehicle loans: Debt tied to a vehicle will typically follow the asset, meaning that the spouse who keeps the vehicle through the property division process will take on that debt. Again, there’ll need to be some legal work conducted to ensure that it’s clear which spouse will become solely responsible for the debt.

Are you worried about taking on too much debt post-divorce?

This is a common concern, and it’s a reminder of why you need to have a strong plan going into your marriage dissolution. We know it can be overwhelming and nerve-wracking, but that’s why legal teams like ours are here to help. So, if you’d like to start developing your divorce strategy so that you can protect your future as much as possible, then now may be the best time for you to reach out for the help that you need.