Recent Analysis Shows The Average American Household Debt Tops $100,000
As of 2015, the average American family owed creditors nearly $131,000. Of that amount, almost $16,000 was credit card debt. The overall amount also included mortgages, student loans, car loans and other outstanding debt. In other words, we’re broke.
Experts say there are a couple of reasons for this. First, living in America is expensive – and there’s no evidence that is going to change. If anything, the cost of living will just keep going up. Secondly, we’re not earning enough to keep up with escalating costs.
So what will happen to all of that debt if you get divorced? The answer is complicated. One factor that determines what happens is where you live. In most states, including New Jersey, the following rule applies to credit cards, some bank loans, your mortgage and so forth. Predictably, you are responsible for any debt incurred on your own credit cards during your marriage, unless it was for martial purposes, for example items for the house, clothes for children. However, you are also responsible for debt incurred in your name and your spouse’s name while you were married. So if you co-signed a loan to finance the family car, you can still be held responsible for that loan after you’re divorced.
For this reason, it is important to keep close tabs on any joint accounts and make sure that any outstanding payments are made promptly. Some experts also recommend that couples considering divorce discuss closing joint accounts in order to avoid potential liability if your spouse accrues debt after you have gone your own ways.
New Jersey courts also have the power to determine how debt should be divided (or who pays what). In order to do so, a judge must first verify two key points. The first is that the debt actually exists. The second is when the debt was incurred, and by whom.
Financial documents, such as bank statements, copies of credit card bills and so forth are usually enough to prove that the debts claimed are legitimate. These records can also be used to help the judge differentiate between “marital” and “non-marital debt.”
Marital debt is the legal term for any financial obligations acquired during the marriage or to cover household expenses. In New Jersey, the term applies to individual and joint debt.
On the other hand, non-marital debt is that accumulated before the marriage; that incurred when the parties separated or divorced; and debt incurred while the parties were together for items unrelated to the household or marriage. Any debt stemming from one person’s use of joint credit card or bank accounts for inappropriate (or illegal) activity is also considered non-marital debt. Non-marital debt is never reassigned. When possible, the person who incurred it must repay it with his or her share of the marital assets.
So what happens after the judge confirms that the debt is legitimate and classifies what type of debt it is? He or she will then deduct the value of the total marital debt from the value of the total marital assets before distributing the assets. Any orders issued related to the payment of marital debt only applies to the individual party or parties involved.
As you can see, distribution of debt in divorce is a complicated subject. If you have debt and are getting divorced, it is important to consult a qualified New Jersey divorce attorney at Lomurro Law. Contact us by phone at 732-482-9285, or contact us online.