New Jersey couples who are going through a divorce often focus on the financial aspects of the process. They worry about how to divide assets, and discuss which spouse will get which items of personal property. One thing that many couples fail to consider is the fact that debt is also part of the property division process, and must also be divided. Failing to have a plan in place can lead to some very undesirable outcomes.
Determining how to divide marital debt is often not the issue. In most cases, debt that is taken on during the course of a marriage is considered to be shared by both parties, and will be divided accordingly. There are exceptions in certain cases, such as when a credit card is used to fund expenses that are solely for the benefit of one party. In general, however, debt that is incurred during the marriage is marital debt.
The problem is that no matter what is decided between spouses, creditors are not bound by the terms laid out in a divorce agreement. Credit card issuers, for example, can and will pursue both parties listed on the account if payment is not made in a timely manner. So, no matter what the divorce agreement states, a spouse who remains listed on a line of credit can be pursued for payment if the creditor deems necessary. That can lead to credit damage and an inability to secure new lines of credit.
The best way for New Jersey spouses to address the issue of credit card and other debt is to ensure that all debts are clearly separated at the time of divorce. While there are some creditors that will remove a spouse's name from an active account, more often the only way to remove one spouse is to pay the debt off in full. That often requires the liquidation of other assets, which is something that must be negotiated during the property division portion of the divorce. By segregating debt, both spouses can walk away from the marriage with greater peace of mind that there will be no lingering repercussions linked to those lines of credit.
Source: The Huffington Post, "Divorce and Credit Card Debt", Justine Borer, April 3, 2017