When couples in New Jersey divorce, the accumulated debts during a marriage are just as important as any assets and can be just as complicated. Understanding how New Jersey law handles marital debt is essential for anyone going through a divorce.
New Jersey Follows Equitable Distribution
New Jersey is not a community property state. Instead, it follows the principle of “equitable distribution,” which means that both marital assets and marital debts are divided in a way that is fair but not necessarily equal. Courts look at the specific circumstances of each couple to determine what a fair division looks like.
Under New Jersey law (N.J.S.A. 2A:34-23.1), equitable distribution applies to all property and debts acquired during the marriage, from the date of the wedding through the date a divorce complaint is filed. Debts that existed before the marriage or were incurred after the complaint was filed are generally considered separate and are not subject to division.
What Counts as Marital Debt?
“Marital debt” includes any financial obligation taken on during the marriage, regardless of whose name is on the account. Common examples include:
- Mortgages and home equity loans.
- Joint credit card balances.
- Car loans.
- Medical bills.
- Personal loans.
- Tax liabilities.
Even if only one spouse’s name appears on a debt, a court may still consider it marital debt if it was incurred for marital purposes, such as a credit card used for household expenses or a loan taken to pay for a family vacation.
How Courts Divide Debt
When spouses cannot agree on how to divide their debts, the court steps in. Judges consider a range of factors under N.J.S.A. 2A:34-23.1, including:
- The length of the marriage.
- The income and earning capacity of each spouse.
- Each spouse’s economic circumstances at the time of divorce.
- Each party’s contribution to the marital estate, including as a homemaker.
- The standard of living established during the marriage.
- Any existing prenuptial agreements.
Judges have broad discretion, and the same factors can lead to very different outcomes depending on the specific facts of the case. This is why negotiating a settlement directly with your spouse and with a lawyer’s guidance is often preferable to leaving the decision to the court.
The Critical Difference: Divorce Order vs. Creditor Obligations
One of the most important things to understand about debt division in New Jersey is that a divorce judgment only governs the obligations between the spouses. It does not change the terms of the original loan or credit agreement with the lender. In practical terms, this means that if a divorce decree assigns a joint credit card debt to your spouse, but they fail to pay it, the creditor can still come after you. Your name remains on the account, and the credit card company is not bound by the terms of your divorce agreement. This can cause serious damage to your credit score and financial standing, even years after the divorce is finalized.
To protect yourself, pay off and close joint accounts wherever possible, or refinance joint debts into individual accounts as part of the divorce settlement.
Separate Debt: When One Spouse Is Solely Responsible
Not all debt incurred during a marriage is automatically marital debt. A spouse may argue that a particular debt belongs solely to the other party if the debt arose after separation, was for purely personal purposes unrelated to the marriage, or was hidden from the other spouse. Courts evaluate these arguments on a case-by-case basis.
Questions About Divorce and Debt Division? Contact our Marlton Divorce Lawyers at Burnham Douglass
Debt division is one of the most overlooked and financially consequential aspects of divorce in New Jersey. Our Marlton divorce lawyers at Burnham Douglass understand the complexities of equitable distribution and are committed to helping clients in New Jersey protect their financial interests during and after divorce. For a free consultation, call today at 856-751-5505 or contact us online. With office locations in Marlton and Northfield, New Jersey, we proudly serve clients throughout the state.