Going into divorce actions, people often do not realize that it is not just marital assets that are distributed by the court. Marital debt is also equitably distributed by the court. Equitable distribution in NJ does not mean equal. Distribution of debt will be done in a way that is seen as fair and reasonable under the circumstances of the case.
Types of Marital Debt
Marital debt consists of the debt incurred by either spouse during the course of the marriage.
Credit card debt is commonly part of marital debt that will be distributed by the court. The general rule is that the full amount of the credit card debt, whichever spouse incurred the debt, is distributed between the parties, though there are exceptions. When only one party has derived a benefit for the expenditure, a court may decide if only that party should be liable for the debt. The court will not go through all charge statements, item by item. If there is a situation where only one spouse has benefited by substantial expenditures, then your attorney will bring that up to the court to have the court consider assessing payment of that particular credit card debt to that spouse.
Mortgages against the marital home or other real property will be distributed in the divorce action as well. There are two typical ways to address the mortgage:
- Sell the real property, pay the mortgage and any proceeds will be divided pursuant to the distribution of marital property made by the court. This can happen right away, or one spouse may stay in the house with the children for a stated period of time before the house is sold.
- One spouse can buy out the interest in the real property from the other spouse and take responsibility for the mortgage, often refinancing the mortgage.
Auto loans are also a common form of marital debt. The rule of thumb is that if you keep the car, you keep the debt along with it.
Types of Separate Debt
The debt incurred by either spouse prior to the marriage comprises separate debt. This debt can include mortgages on separate property, student loans, pre-marriage charge obligations, medical bills and anything else anyone owes to others when they come into the marriage. In considering how to distribute marital debt, a court can consider the amount of separate debt each spouse is carrying.
Factors Applied by the Court to Determine Equitable Distribution of Marital Debt in New Jersey
New Jersey judges have discretion in applying any and all of the sixteen statutory factors set forth in New Jersey Statute. N.J.S.A. 2A:34-23.1. The court having discretion in applying the factors means that it is entirely up to the court how much weight to give each and every factor and any other factors the court believes are relevant in each particular case. This requires the court to have a solid understanding of the parties’ respective financial circumstances during the marriage and at the time of distribution of debt.
Some of the statutory factors are:
- Duration of the marriage
- Property and income brought into the marriage by each party
- Debts and liabilities of each party
- Standard of living established during the marriage
- Income and earning capacity of each party
- Eleven other statutory factors
- Any factor the court find relevant
As with marital debt, distribution of marital debt can be an extremely complicated determination.
If you need to discuss your New Jersey divorce action and equitable distribution of debt in your divorce action, call the Law Offices of Peter Van Aulen for a free consultation at 201-845-7400.