Understanding how your debt will be handled after filing for divorce can be confusing. While your New Jersey divorce attorney can help you better understand your unique situation, there are a few guidelines you’ll want to know about before you meet. Let’s take a closer look.
It Depends on How Your Debt Is Classified
When it comes to dividing debt in a New Jersey divorce, the first step is to determine whether the debt is classified as marital or separate. This distinction impacts how the court will allocate debt between you and your spouse.
Marital Debt
Marital debt encompasses any financial obligations that you and your spouse incurred together from the date of your marriage up until you file for divorce. These debts typically financed items and purchases used by the family or for the benefit of the family.
Common examples of marital debt include but aren’t limited to the following:
- Mortgages
- Joint credit card balances
- Car loans for family vehicles
- Personal loans for shared expenses
- Home equity loans
If you’re not sure if a debt counts as a marital debt, your New Jersey divorce attorney can help.
Separate Debt
Separate debt refers to financial obligations that either spouse incurred before the marriage or any debt acquired after one spouse filed for divorce. The court typically considers these debts to be the sole responsibility of the spouse who took them out.
Examples of separate debt could include obligations like:
- Student loans
- Credit card debt from before the marriage
- Loans applied for after filing for divorce
As a general rule, separate debts are those that one spouse applies for and uses. The money goes directly to their benefit rather than you as a couple or family.
Marital Debts Are Divided Equitably
New Jersey is an equitable distribution state. This means the state tries to divide debt in a way that’s equitable to each spouse when dividing the marital estate. Keep in mind that “equitable” does not automatically translate to a 50/50 split.
Instead, equitable distribution means that the court will divide marital property and debt in a way that is fair and just based on the nuances of your case and your financial situation. IN some cases, this may involve a 50/50 division. In others, the court may divide debt in a 70/30 or 90/10 arrangement. It all depends on each spouse’s financial situation and other similar factors.
How Courts Determine Equitable Distribution
New Jersey courts consider a variety of factors outlined in the law which help the court determine a fair and equitable distribution of your debt. Here are a few key factors the court will consider:
- Duration of the marriage: A longer marriage often implies a greater commingling of finances and a deeper intertwining of financial responsibilities, which can influence how debts are divided.
- Each spouse’s income: The court carefully weighs the current and potential future earning capacity of each spouse. A significant disparity in income might lead the court to allocate debt in a way that accounts for each spouse’s ability to manage those obligations moving forward.
- Any prenuptial agreements: If you and your spouse entered into a prenuptial agreement, this document will likely outline how assets and debts should be divided in the event of a divorce. Courts generally uphold valid prenuptial agreements.
- Contributions to the marriage: The court will assess each spouse’s contributions to the marriage, both financial and non-financial. This includes income earned, but also contributions as a homemaker, caregiver, or in supporting the other spouse’s career.
Ultimately, it’s up to the court to determine what’s fair. Keep in mind that you and your spouse may come to an agreement with help from your New Jersey divorce attorney. If you reach an agreement out of court, the court should honor that agreement, even if they help you reach other terms in your divorce.
Schedule a Consultation Today
If you’re considering getting a divorce, speak with a New Jersey divorce attorney as soon as possible. Contact Carvajal Law today to schedule a free consultation and get the advice you need to proceed with your case.