Many Americans carry a lot of debt — credit cards, car loans, mortgage loans, student loans, etc. Even with a healthy income, debt can be difficult to manage. When those debts become entangled with other emotional issues during a divorce, things can turn ugly fast.
When you decide to divorce, you not only need to negotiate the division of assets, but the division of debt as well. And if it’s not done correctly, you could get stuck with your ex’s debt after the divorce is final.
In an equitable distribution state like New Jersey, debts that are incurred by each spouse prior to the marriage will belong to the spouse who incurred that debt. After marriage, any debts for which a couple co-signed will be considered marital property that is subject to division in a divorce. Debts incurred individually during the marriage will usually belong to the spouse who signed up for the credit card or applied individually for a loan.
During your divorce settlement negotiations, you and your spouse can agree on which one of you will be responsible for which debts, or you can let a judge decide. Whichever way you go, your final settlement will specify which of you must pay.
However, no matter what the final decree states, there are times when a spouse who is responsible for debts fails to live up to their obligations to repay those debts. When that happens, you could be on the hook for repayment if you were a co-signer. For example, if one spouse keeps the house and agrees to pay the mortgage, but you leave your name on the loan, the lender will still hold you responsible if payments are not made. The same goes for any other debts, including credit cards, personal loans, etc. Creditors will view both of you as liable for the debt, no matter what the final divorce decree states.
To protect yourself, be sure to close any joint credit card accounts or other accounts you may share with your ex. Get a mortgage loan refinanced in the name of whoever stays in the house. And finally, if you can, pay all your joint debts in full to keep your credit from being ruined by an ex.
When you are faced with an important life decision regarding a key family relationship, the advice and assistance of an experienced family law attorney often proves crucial to your understanding of the issues involved and your satisfaction with the ultimate outcome of your family law matter. Contact us today for your free consultation.