Edward R. Weinstein, Esq.

Where does all the debt go in a divorce?

“What happens to my debt when I get divorced?” is a very common question I am asked by clients starting the New Jersey Divorce Process. Typically, couples are worried about debt they have accrued on credit cards, a home equity line of credit, student loans, and car loans. Often, your attorney will review the documentation you provide and combined with other financial factors, explain options to you.

Every financial aspect of your divorce agreement is up for negotiation. This includes how all assets will be divided as well as who will assume debts once your divorce is finalized. It is critical to work with an attorney who can offer creative solutions to your debt exposure with great care that you will be financially sound in your post divorce life.

As you get started with the divorce process, we will file a complaint for divorce with the Superior Court of the county where you reside. As of that date, you and your spouse are no longer responsible for each other’s debts. At this time it is best to cancel your joint credit cards and open new individual accounts.

Your final divorce agreement will specify which party will be responsible for the debt once the marriage is ended. One major obstacle is that while your soon-to-be ex-spouse is responsible for a particular debt it is critical to remove your name with that creditor. If your name remains on any outstanding loan or credit account, you may be held responsible if the account should go into default and it could impact your credit report. Creditors may continue to try to collect from you regardless of your divorce agreement. Additionally, if, post divorce, your ex-spouse accrues more debt on a particular account, while your name is attached, you are responsible, and again, could have a credit problem. Your attorney should put very clear language into your agreement detailing how to divide up the debt and remove your name from those you are not responsible for any longer.

Debts are sometimes attached to material objects such as cars, boats, and collectible items of significant value. As a general rule of thumb, the party who is going to assume the item will also assume the debt attached. Additionally, the payments of all debts may be considered into your expenses when calculating alimony and child support.

There is no need to be confused or worried. No matter how complex a competent divorce attorney will work through each aspect of your financial situation and develop a plan with you to be on stable financial footing in your post-divorce life.