Debt and Divorce: How is it Split?
During a divorce, most people focus on the division of assets: Who gets the house? What happens to our retirement accounts? What about the cars?
Let’s not forget that for every car, there is an auto payment.
How is Debt Split in New Jersey?
New Jersey has an equitable distribution statute that requires all property, assets, and debts acquired throughout the course of the marriage to be divided in a fair and reasonable manner. The term “equitable” does not necessarily mean “perfectly equal.”
The way assets, debts, and properties are split depends on the couple’s ability to negotiate with each other, along with the subjective opinion of the court judge. The court has a set of 16 criteria that help guide the process, but ultimately it is the judge that determines what criteria hold the most weight over the other ones.
For this reason, it is better to negotiate an agreement with your spouse (if possible) rather than leaving the final decision up to the discretion of the judge.
According to N.J.S.A. 2A:34-23.1, the court considers the following factors when splitting marital assets and debt:
- Age and health of both parties
- Contribution by each party to the education, training or earning power of the other
- Contribution by each party to the increase or decrease in value of the marital property, as well as each party’s contribution as a homemaker
- Debts and liabilities of the parties
- Duration of the marriage
- Economic circumstances of each party
- Existing prenuptial agreements
- Marital standard of living
- Needs of the custodial parent
- Premarital income or property
- Present value of the property
- Tax consequences of the proposed distribution to each party
- The extent to which a party deferred achieving their career goals
- The income and earning capacity of each party
- The need for a trust fund to secure medical or educational costs for a spouse or child
- Any other factors the court may deem relevant
How is Credit Card Debt Split in a Divorce?
Generally, credit card debt accrued during the marriage is split down the middle. It doesn’t matter whether the card was issued in only one name, or both parties were authorized users. If the money was spent during the marriage, it is typically considered martial debt.
If it can be proven that a large purchase benefited only one spouse, it is possible to argue the benefiting spouse should be exclusively responsible for the debt resulting from that purchase.
What About Student Loans?
Any debt incurred before the marriage is considered individual debt. This can include student loans, medical bills, credit cards, and debt from prior residences.
Protect Your Credit
Your divorce settlement should have clearly-defined processes for how marital debt is handled post-divorce. What accounts are getting closed? Who is responsible for making the payments? What happens if one person stops making the payments?
Missing debt payments is an easy way to damage your credit, even if making the payment wasn’t your responsibility. There isn’t much you can do to protect your credit score from a delinquent ex-spouse, but including a “hold harmless clause” will give you a remedy against your spouse in the event he or she fails to pay a debt for which he/she assumed responsibility.
Hire an Experienced New Jersey Divorce Lawyer
The family lawyers at Arons & Solomon, P.A. hold decades of experience in all areas of New Jersey divorce, from mediation to litigation. Contact us for a free initial consultation to organize the facts of your case and get the results you deserve.
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