Divorce and the Division of Marital Debt in New Jersey
Mount Laurel Divorce Attorneys • Division of Marital Debt
Regardless of whether you’re considering divorce or have already been served with divorce papers, how you settle existing marital debt is as important as the division of marital property. Here, it’s important to keep in mind that you’re financially responsible for any loan, credit card, or line of credit your name is on.
This means if you jointly applied for financing on your spouse’s car you’re still responsible for any debt on it even if he or she is the only person that ever drives it. Likewise, your spouse may have a Macy’s, Costco American Express, or Citibank credit card that you never use. Even so, if your name is on the account and he or she defaults on payments, the creditor can still pursue collection actions against you.
The Divorce Agreement and Marital Debt
While it’s always wise to include language in your divorce settlement that indicates who is responsible for what debts, this is not enough to protect you in the event your spouse fails to pay off the debt in question. The terms of your divorce agreement are binding on you and your spouse but have no legal relevance regarding your obligations to creditors.
As such, if your spouse defaults on a credit card he or she agreed to pay off, you can’t protect yourself against collection actions by claiming your divorce settlement specifies that your spouse will pay off its outstanding debt. As far as the credit card company is concerned, your name is on the account so you can be held responsible for it.
Marital Debt – How to Use the Divorce Settlement to Protect Yourself
In order to avoid problems with marital debt after your divorce, it’s best to find ways to settle debts before your divorce agreement is finalized. If you and your spouse are willing to work together, you can agree to allocate certain assets in exchange for paying off various debts. For example, if $10,000 is owed on your spouse’s car loan you co-signed, you can agree to pay off the loan in exchange for a similar value in marital assets – say, CDs, IRAs, or money in a savings account.
If this isn’t possible and you intend on selling your marital home, you can specify in advance that certain money will go to you to reimburse you for the debts you’ve accepted or to pay creditors directly. If your spouse is unwilling to work with you in this regard, specifying in your divorce settlement who is responsible for what debts can provide you with legal leverage to sue your spouse if he or she defaults on debt assigned to them.
Protect Your Financial Future – Contact Taylor & Boguski
There are a number of financial issues to consider in divorce. Understanding steps you can take now to protect yourself will help ensure your financial stability in the future. Here, it’s important to understand how divorce can affect your credit and what you can do to protect your credit score. To learn more about marital debt and divorce, contact Mount Laurel divorce attorneys at Taylor & Boguski, LLC today.