One of the most complex issues in a divorce is figuring out how to untangle two lives that have been intertwined for so long. The couple likely acquired many assets and incurred many debts together throughout their relationship. Dividing shared assets and debts can be complicated, especially when income and earning capacity differ significantly between parties. To learn more about how joint debts are divided in New Jersey divorce agreements, continue reading and reach out to an experienced Mountainside property distribution attorney to set up a consultation today.
What are Joint Debts?
In terms of a divorce, joint debts are any financial contracts or obligations that both spouses in the relationship are responsible for. These liabilities were likely incurred during the course of the marriage for the purpose of building a life and home together.
Joint debts may include a mortgage, car loan, student loan (if both individuals benefitted from the education), credit card debt, medical bills, utility bills, and more. When both individuals contribute to the debt, have their name on the account, or benefit from the liabilities in any way they are generally considered joint.
How are Joint Debts Divided in a Divorce?
In New Jersey, as in many other states, shared debts are considered marital property, meaning they are subject to distribution between the two spouses. NJ courts will generally divide the liabilities between the spouses based on an equitable distribution plan.
The goal of an NJ court is to prioritize a fair allocation of these debts. During the process, they will take into account a wide variety of factors to ensure equitable distribution. Some of these factors include the following.
- The income of each spouse
- The earning capacity of each spouse
- Each spouse’s contribution to the marriage
- Why the debt was incurred
- Who incurred the debt
- What the debt was used for
After evaluating the above information and more, the court will assign each individual a portion of the total debts. The higher-earning spouse may be responsible for a larger amount of debt because they have the ability to pay for it. Additionally, if some of the debt only benefited one spouse, they may be required to take accountability for the amount.
Spouses can also come up with their own distribution plan outside of court if they are inclined to do so. They may agree to split all of the debt evenly, to assign one spouse a significant amount of debt in exchange for additional assets, to distribute it based on the loan’s intended purpose, etc. As long as the plan is relatively equitable and fair a court may approve an agreement created between the two individuals.
Both spouses should understand that even after the divorce is finalized, both of their names will still be present on any unpaid debts. This means that even if a court assigns one spouse the car loan, if they fail to make payments then debt collectors have the legal right to pursue compensation through the other spouse. Speak to an experienced family lawyer today for more information and legal advice.
