Determining Division of Debt in a Divorce

On top of the physical and emotional challenges that accompany separation and divorce, the question of debt division can introduce significant financial uncertainty for separating couples. Let us help you understand the allocation of debts during your divorce to help you prepare for this difficult process and protect your financial future.

What Types of Debt Are Divided in a Divorce?

When going through a divorce, you typically need to address all debts accumulated during the marriage in the settlement, including mortgage loans and home equity lines of credit, credit card balances, auto loans, student loans, personal loans, medical debts, tax liabilities, and business debts.

How Does New Jersey Law Handle Debt Division in Divorce?

New Jersey follows equitable distribution principles when dividing marital assets and debts, which means that the court may not split your debts 50/50—instead, the court will make what it believes to be a fair decision based on numerous factors:

• When the debt was incurred.
• Whose name is on the debt.
• Whether the debt benefited the marriage or just one spouse.
• Each spouse's financial situation and earning capacity.
• Length of the marriage.
• Contributions of each spouse to marital finances.
• Tax consequences of the distribution.
• Other relevant factors specific to your situation.

What Is the Difference Between Marital and Separate Debt?

The court will need to determine if you and your spouse held each debt jointly or separately; if the former, the debt will generally include any obligations incurred during the marriage, regardless of which spouse's name appears on the account. The court will subject these debts to equitable distribution.

Separate debts, however, usually include debts acquired before the marriage or after the date of separation, those specifically designated in a prenuptial agreement, and those incurred for non-marital purposes (such as gambling debts or expenses related to extramarital affairs).

Can a Prenuptial Agreement Affect Debt Division?

A valid prenuptial agreement can affect the division process by spelling out clear, preestablished terms about financial responsibilities. These agreements can specify which debts the court should classify as separate, how to handle certain other debts, and procedures for handling joint accounts.

For a prenuptial agreement to be enforceable, it must have been properly executed, with full financial disclosure from both parties, and without signs of coercion or unfairness.

What Should I Do About Joint Accounts During Divorce?

When both spouses’ names are on a joint account, both parties remain legally responsible for the debt regardless of the divorce decree. Consider freezing or closing joint accounts when possible, opening individual accounts for new expenses, monitoring joint accounts regularly for unusual activity, documenting all account balances at the time of separation, and refinancing joint debts to remove one spouse's name.

Remember: Creditors do not need to pay attention to the terms of your agreement and can pursue either party for fulfillment.

Find Solutions for Your Divorce Debt Concerns with the Monmouth County Divorce Lawyers at Sanvenero & Cittadino Attorneys at Law

If you need help with your debt division questions during your separation and divorce, trust the Monmouth County divorce lawyers at Sanvenero & Cittadino Attorneys at Law. We have years of experience successfully protecting our clients' financial interests through strategic debt division negotiations and litigation. Call us at 732-743-9665 or contact us online for a free consultation. Located in Shrewsbury, New Jersey, we proudly serve clients in Monmouth County, Middlesex County, and Ocean County.