Spousal Debt Liability in NJ

When you divorce in New Jersey, your shared property is subject to distribution between you and your spouse. You can agree to the distribution of property in a marital settlement agreement, or you can leave it up to the court to decide. Marital property includes nearly all assets acquired during the pendency of the marriage, as well as debts and liabilities incurred. To learn about how New Jersey law and courts handle marital debt in a divorce, read on. If you’re dealing with divorce or if you have questions concerning the equitable division of property, call a seasoned New Jersey divorce and property distribution attorney for advice and representation.

Marital Debts Are Marital Property

In New Jersey, all property acquired or earned by either spouse during the pendency of the marriage (with limited exception) is considered marital property. New Jersey law requires the equitable distribution of marital property upon divorce. “Property” is defined very broadly, and as we’ve discussed, everything is considered marital property until proven otherwise. Property includes just about any form of asset, from bank accounts to business ownership interests to cars and personal items.

“Property” also includes debts and liabilities. That means that debts incurred–by either spouse–during the pendency of the marriage will be treated as marital property. Upon divorce, each party is entitled to their fair share of the marital estate, including marital debts.

Separate debt, meaning debt that either spouse acquired before the marriage, is not subject to distribution. Separate debt remains separate. For example, if one spouse had student loans from before the marriage, that spouse will keep that debt upon divorce.

Debts and Equitable Distribution

Ideally, you and your spouse can reach an agreement on how your marital property should be distributed. You can enter into a settlement agreement dictating which property, including debts as well as assets, belongs to each spouse following the divorce; once agreed upon, the court will incorporate that settlement agreement into its final order, absent some unusual problem. If you and your spouse cannot agree on a distribution, however, you’ll need to present your case to the court. The court will then decide upon the equitable distribution of both assets and liabilities.

The court’s decision will rest on the principles of fairness and equity. Marital property is not necessarily divided 50/50 (unlike in a community property state); instead, the court will determine a fair distribution. The court will evaluate 16 specific factors laid out in N.J.S.A. 2A:34-23.1. These factors include:

• The duration of the marriage
• The income or property brought by each party to the marriage
• The income and earning capacity of each party
• The standard of living established during the marriage
• The contribution of each party to the training, education, or earning power of the other
• The tax consequences of distribution
• The debts and liabilities of the parties

Based on an analysis of these and other listed factors, the court will decide upon a fair and equitable distribution of all marital property, including assets and debts. The court can weigh each factor according to its discretion and can even consider additional relevant factors beyond those listed in the law.

Be Aware of Spousal Debt Upon Divorce

Spousal debts are an important issue to consider when divorcing. Often, there’s more debt than cash coming out of a divorce. Credit card debt is one of the leading causes of individual bankruptcy in the U.S. Mortgage debt is also a common, and significant, liability for many divorcing couples. If one spouse files for bankruptcy on a jointly owned debt, the other spouse could find themselves liable. It may be best to close accounts upon divorce by, for example, closing credit cards or selling off the house, in order to ensure that there is no unexpected and unnecessary liability down the line. Discuss your finances and your debt situation with your divorce attorney and your financial advisors to determine the best path forward for you and your family.

Call for Experienced Legal Help With Your New Jersey Property Distribution Dispute or Divorce

If you need dedicated legal help with equitable distribution of property, child custody, separation, divorce, child support, alimony, or other family law matters in New Jersey, contact the Union offices of family law attorney John B. D’Alessandro at 908-964-0102.