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What happens to credit card debt in a New Jersey divorce?

If you are considering filing for divorce in New Jersey, it is a good idea to sort out your finances as soon as possible so that you can ensure an equitable division of both your assets and liabilities. Most couples are so concerned about dividing their assets/property that the latter gets overlooked, and such a lack of concern about debts can lead to financial disaster for one or both spouses following their divorce. Here's what you should know about how credit card debt is treated in a New Jersey divorce case.

How credit card debt is divided in New Jersey

New Jersey is an equitable division state, so the courts consider marital debts as well as assets when deciding how property should be divided. Debts are classified as either marital or non-marital. Marital debt consists of liabilities incurred:

  • During the marriage
  • For necessities or the benefit of the household (groceries, utilities, medical bills, etc.)
  • By both spouses jointly or one spouse alone

Both spouses are usually responsible for marital debt because creditors expect that the assets of both are available to pay what is due. Additionally, married spouses anticipate that their assets and incomes will be used for the good of their partnership and the household.

Non-marital debts include those incurred during the marriage, but not for its benefit, and debts that resulted from one spouse's dissipation (misuse) of the finances-- money spent on drugs, gambling, or an affair, for example. Normally, the innocent spouse is not held liable for the guilty spouse's dissipation.

The court will decide the division based on these factors

The courts take three factors into account when determining credit card debt:

  1. Existence (legitimate proof) of debt
  2. Nature of the debt (marital or non-marital)
  3. Allocation of debt (how it will be assigned to each spouse)

Creditors are not bound by the divorce agreement

Creditors can seek re-payment from either spouse regardless of a court order. If, for instance, the court orders a husband to pay off a credit card balance and he defaults, the creditor can go after the wife. To protect yourself, you can settle your debts during the divorce process. Another option is to enter into what is known as an indemnification agreement, which essentially dictates that if your spouse fails to pay a creditor and the debt reverts to you, your spouse has to compensate you for footing the bill. Similar indemnity language may be incorporated into a more comprehensive Marital Settlement Agreement.

Consult an attorney

If you are thinking about a divorce in New Jersey, a qualified attorney can help you understand your rights and responsibilities and ensure a fair outcome. 

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