Dividing Debts in Divorce

Family Law Attorney Advising Bergen County Residents

When it comes to property division in divorce, people often focus primarily upon who will get the family house, cars, and cash. But an important aspect of property division that should not be overlooked is the division of debts. In some cases, disputes over who will carry a particular debt may become more contentious than who will receive a particular asset. If you need assistance with these issues, Bergen County property division lawyer Brian D. Iton can guide you.

An Appropriate Division of Debts Can Protect Your Financial Future

Under New Jersey law, all marital assets and debts must be divided “equitably,” meaning that the court will allocate assets and debts “fairly” between the spouses.

As with assets, the first determination in reviewing debts is whether they should be characterized as separate or marital. A debt that a spouse incurs outside the marriage (either prior to the marriage or following a separation) is generally considered to be a “separate” debt. In general, any debts incurred during the marriage for the benefit of the marriage are considered marital debts. However, the key term is “for the benefit of the marriage.” If one of the spouses incurs a debt through the misuse or misspending of funds—such as by gambling—a court has the discretion to characterize the debt as the “separate” debt of the spouse who misused the funds.

Vehicle Debt and Mortgage Debt

Often during a marriage both spouses sign a note for the purchase of their car and their house. This makes them co-debtors on the note, and each of them is jointly and fully liable for payment of the note. In the example of a car note, if one spouse wants to keep the car post-divorce and the car debt is in both names the spouse who wants to keep the car can agree to continue to make the full payment on the car. He or she would also sign an indemnification agreement that would require them to pay the car note on a timely basis until the note is fully paid off. The agreement would require the spouse keeping the car to fully indemnify and hold harmless the other spouse from any liability on the car note. What this means is that the spouse who is holding onto the car is pledging to the other spouse that if they fail to make the payments and the car financing company sues both spouses the spouse who kept the car will take full responsibility for all costs associated with the lawsuit and payment of the note.

With regard to mortgage debt, because a mortgage is usually for a much longer term then a car note the spouse who wants to keep the house post-divorce usually pledges to pay the note and indemnify the other spouse. However, since it could be 10, 15 or 30 years before the note is fully paid the spouse who is keeping the house also usually agrees to either assume the mortgage or refinance the mortgage into their sole name within an agreed upon period of time. Normally the agreement is that if they cannot assume or refinance the mortgage the house will be sold to payoff the debt.

Credit Card Debt

With joint credit card debt there is no asset for one party to keep so paying off the debt is just a matter of deciding who will actually forward the payments to the creditor and over what period of time. The parties will also have to agree not to use the cards any further.

Discuss a Property Division Matter With a Bergen County Lawyer

Whatever your situation, to avoid damage to your credit rating it is critical that you do not neglect to incorporate all of your marital debt—including car loans, mortgages, tax liability, business loans, personal loans, and any other financial obligations—into your property division agreement. Identifying potential debt issues, allows you to minimize your exposure to the financial risk of a debt default by an ex-spouse. For guidance on the options that you may have regarding your debt issues, call Bergen County property division attorney Brian D. Iton at (201) 731-3086 or toll-free at (844) 431-3380, or use the contact form on this website to set up a free consultation. Brian D. Iton has extensive experience as a divorce attorney assisting people in Hackensack, Paterson, Newark, Jersey City, and other cities in Bergen, Hudson, Essex, and Passaic Counties.