It comes as no surprise that separating or divorcing couples often fight over finances, especially debt. Heck, happily married couples often fight over their finances. What a lot of people do not realize is that they may be responsible for their spouse’s debt in the event of a divorce. If you share the same household, you share the same expenses and the debt incurred to pay these expenses is usually considered joint marital debt under New Jersey Equitable Distribution Statute (N.J.S.A. 2A:34-23.1).
I know that this seems unfair if your spouse has a closet full of designer handbags and clothing or a garage filled with fishing poles and kayaks, and you are still wearing the same jeans from 10 years ago and riding the same bike you bought in college. The difficulty that the court has with allocating all of the debt to the party who incurred the debt is that the spending was a part of the marital lifestyle, it is often difficult to prove exactly what was purchased using credit and you knew or should have known about your spouse’s spending.
Generally the court will take your debts and assets into account when determining equitable distribution. A court may do this by allocating debts and assets separately or it may deduct the debt from the value of the assets. Although, the value of a used handbag or kayak is rarely similar to the purchase price. It is also possible, although not common, for a court to divide assets between you and your spouse, but not divide debts or certain debts. This may occur if a spouse intentionally dissipates or has no proof of a debt, such as a loan from a family member. See Monte v. Monte, 212 N.J. Super. 557 (App. Div. 1996).
This may help those of you who are surprised by your spouse disclosing that he borrowed $25,000 from his parents, but what about those of you who learned your spouse owes $25,000 on credit cards? If you can prove that your spouse went on a spending spree right before filing for divorce or that the debt is attributable to certain assets you can seek for your spouse to be responsible for the debt in full or a disproportionate share of the debt. Whether or not you will succeed will depend on the specific facts of your case and what you can prove to the court.
What about those of you who earn substantially less than your spouse? How is it fair that you have to pay a portion of marital debts, especially debts that you were no aware of, when you are barely able to pay your basic monthly expenses? The good news is that often the courts will find that debts can be allocated disproportionately based on the earning capacity of the two individuals, meaning that if you less than your spouse you will be responsible for less debt.
If you have any questions concerning the allocation of debts and assets in a divorce please, we have the experiences and resources to address your unique situation. Please contact us to discuss the particulars of your situation.