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3 mistakes people often make when dividing debt during a divorce

On Behalf of | Mar 22, 2024 | DIVORCE - Divorce

Divorce proceedings are often complex. For example, they usually involve the division of assets and liabilities.

In New Jersey, the spouses may fully not understand the implications of joint accounts and debts.

1. Not quite separate debts

In New Jersey, the spouses typically divide marital property, including debts. However, equitable division does not always mean equal division. Joint debts, such as mortgages, car loans or credit card balances, are often liabilities that the spouses share. This may be true even if only one spouse’s name appears on the account. These debts can be high. For example, the median monthly costs of homeowners in Hackettstown with a mortgage are $2,405 per month.

Both parties may be responsible for repayment following the divorce. Ignoring this fact can lead to disputes and financial strain down the road.

2. Open accounts

Not closing joint accounts is an oversight during divorce proceedings. Leaving joint accounts open exposes both parties to potential financial risks. Either spouse can continue to incur debt on these accounts.

Furthermore, if one spouse fails to make payments on a joint account post-divorce, it can negatively impact the other spouse’s credit score and financial stability. Closing joint accounts and dividing the associated debt protects both parties’ financial interests.

3. No documentation

Not getting documentation of all joint debts and liabilities can complicate the division process. Gather comprehensive records of all marital debts, including account statements, loan agreements and credit reports. Without accurate documentation, it can be tricky to determine the extent of each party’s financial obligations and ensure a fair division of debt.

By avoiding these common pitfalls, individuals can protect their financial interests. They can facilitate a smoother transition to post-divorce life.