One of the biggest possible points of contention you may face when going through a divorce is asset division. It’s natural for both you and your spouse to want to know who gets what. But what about your debts?
A fair and equitable division
Like your marital assets, liabilities or debt are also distributed between you and your spouse. New Jersey is an equitable distribution state, and this rule also applies to dividing debt.
It is important to note that equitable does not mean equal—it means fair. It means the court will divide your marital debts fairly based on several factors, rather than just splitting everything 50/50.
Factors considered when dividing debt
The factors that courts will consider when dividing debt are similar to the factors considered when dividing marital assets and determining spousal support payments. These factors include:
- Length of the marriage
- Age and health of each spouse
- Income earning ability of each spouse
- Prenuptial or postnuptial agreements
- Standard of living during the marriage
- Nonmarital debts of each party
- Nonmarital assets or property of each spouse
- The cause of the debt, such as one spouse’s gambling or spending problem
Identifying marital and nonmarital debt
The court only divides marital debt during divorce. Marital debt refers to any debt you and your spouse incurred or took on during your marriage, such as a house mortgage or a car loan.
If you have existing debt before entering your marriage, you will remain responsible for this debt. Two examples of nonmarital debt are student loans and credit card debt on your personal bank account.
Commingled debt can complicate matters
Telling marital from nonmarital debt isn’t always black and white. Commingling debt can happen if you mix marital and nonmarital debt. Individual debt, like a student loan, becomes commingled if you use your joint accounts to pay for it.
Keeping up-to-date records of all your finances and accounts may help you avoid taking on unwanted debt. It’s also best to seek professional counsel and to be fully transparent about your personal assets and debts during divorce talks to ensure a fair division of both debts and assets.
Subscribe To This Blog's Feed