Debt Division in New Jersey Divorces: Who Owes What?

Property division in divorce is not only about dividing assets; it’s also about determining how to handle debt. Couples often accumulate debt together during the course of their marriage, whether through mortgages, credit cards, or personal loans. When divorce occurs, this debt must be divided between the parties. In New Jersey, the process for dividing debt can be as complex as asset division, requiring a careful analysis of several factors.

Read on as we break down the basics of debt division in New Jersey divorces, focusing on common types of debt like credit card balances and loans, as well as how courts determine who is responsible for what. For help with debt division, property division, and other aspects of your divorce in Union, Essex or Middlesex County, contact the Law Offices of John B. D’Alessandro to share your concerns with a skilled and experienced Union equitable distribution lawyer.

New Jersey’s Equitable Distribution Law

New Jersey is an equitable distribution state, meaning that property and debts acquired during the marriage are divided fairly, though not necessarily equally, between the spouses. This principle applies to both assets and liabilities, including credit card debt, mortgages, car loans, and other financial obligations.

What Is Marital Debt?

Marital debt refers to any financial obligation incurred by either spouse during the marriage. In New Jersey, the court assumes that most debts accrued during the marriage are shared by both spouses, regardless of whose name is on the account. For example, if one spouse has a credit card in their name but the charges were made for household expenses, the debt may be considered marital and divided between both parties.

Debt that is clearly personal in nature, such as student loans or credit card purchases for personal luxury items, may be treated differently, depending on the specifics of the case. The court’s goal is to divide the debt in a way that is fair to both spouses, considering factors like each party’s income, financial need, and contribution to the marriage.

Credit Card Debt in Divorce

Credit card debt is one of the most common financial obligations faced by divorcing couples. Under New Jersey law, if the credit card was used to pay for household expenses or to benefit both parties, the debt will likely be considered marital. For example, if the card was used to pay for groceries, utility bills, or family vacations, the balance may be divided between the spouses.

However, if one spouse used the card for personal purchases, such as buying luxury items or paying for a personal hobby without the other spouse’s knowledge or consent, the court may assign that portion of the debt solely to the spouse who incurred it.

It’s also important to note that while the court may divide credit card debt between spouses, this division doesn’t change the terms of the credit card agreement. If both spouses’ names are on the account, both will remain legally responsible for the debt in the eyes of the credit card company, even if the court orders one party to pay it.

Loan Obligations in Divorce

In addition to credit card debt, divorcing couples in New Jersey often face the challenge of dividing loan obligations. These may include mortgages, car loans, student loans, and personal loans. As with credit card debt, the court will look at when the loan was incurred and for what purpose.

• Mortgages: If a couple owns a home together and still has a mortgage, the division of the mortgage debt can be complex. The court will consider whether one spouse will remain in the home and take on the mortgage payments or if the property will be sold and the proceeds used to pay off the mortgage. Any remaining debt will be divided equitably between the spouses.

• Car Loans: The court will generally award the car and the associated loan to the spouse who will keep the vehicle. If both spouses share the vehicle, or if one spouse co-signed on a loan for the other, the division of the debt may require additional negotiation.

• Student Loans: Student loan debt is treated differently from other types of debt. If one spouse incurred the debt before the marriage, it will typically remain their separate responsibility. However, if the loans were taken out during the marriage, the court will evaluate whether the education benefited the family or primarily benefited the individual. In many cases, student loan debt remains the responsibility of the spouse who took out the loans.

Factors Courts Consider in Debt Division

New Jersey courts use several factors to determine how to divide debt equitably. Some of the most important considerations include:

• Each spouse’s income and financial resources: If one spouse earns significantly more than the other, the court may assign a larger portion of the debt to the higher-earning spouse.

• The purpose of the debt: Was the debt incurred to benefit both spouses or the household, or was it for personal use? This distinction can significantly impact how the debt is divided.

• Who benefited from the debt: If one spouse’s actions created the debt but both parties benefited (such as purchasing a family car), the court may divide the debt more equally.

• Each spouse’s ability to pay: The court will evaluate each spouse’s financial circumstances to ensure that the debt division is fair and manageable.

Protecting Yourself from Debt Liability

To protect yourself from being held responsible for debts you did not incur, it’s essential to document how each debt was used and whether it benefited the marriage or was for personal use. Providing accurate financial records can help clarify which debts should be considered marital and which should be separate.

Additionally, if you and your spouse have joint credit card accounts or loans, you may want to close or freeze those accounts as soon as possible to prevent further charges during the divorce process. Consult with an attorney before taking this step to make sure you do not run afoul of any court orders requiring the couple to maintain the financial status quo during the divorce process.

Contact the Law Offices of John B. D’Alessandro for Asset and Debt Division in Your New Jersey Divorce

The division of debt in a New Jersey divorce can be complex, but understanding how the state’s equitable distribution laws apply to credit card debt, loans, and other financial obligations can help you navigate the process. Whether you’re concerned about being held responsible for debt you didn’t create or want to ensure a fair division, working with an experienced family law attorney is crucial.

At the Law Offices of John B. D’Alessandro, we have years of experience helping clients in Union, Essex, and Middlesex counties resolve their divorce-related debt issues and other family law matters. Contact us today at 908-964-0102 for personalized legal guidance tailored to your unique circumstances.