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Managing debt in a New Jersey divorce

A lot of attention is paid to the issue of dividing the marital property in a New Jersey divorce. However, just as important -- if not more important in some cases -- is how marital debt will be handled. Splitting up the debts in a divorce settlement is often not the end of the story.

Firstly, a divorce settlement holds no weight with creditors. If both parties are still listed on a debt after the divorce, it does not matter to the creditor who agreed to pay it. If one spouse does not pay it, the other spouse is expected to pay the bill. Therefore, if a party agrees to take on a debt, it should be transferred into that party's name alone in order to protect the other party in the event the debt is not paid as agreed.

Second, it would be beneficial to close as many credit accounts both parties are allowed to use prior to filing for divorce. It is not unheard of for an angry soon-to-be ex-spouse to continue using a credit account in an attempt to get back at the other spouse. It may not be possible to close out a joint account without the consent of the other party, but it may be possible to freeze the account or somehow block the ability to use the account. Once it is paid off, it can be closed.

It is up to each party in a New Jersey divorce to protect his or her credit. Relying on a divorce decree alone to make someone pay a marital debt is unwise. Taking the additional steps necessary to move liability for a debt to one person can provide peace of mind to the parties as they move forward with their separate lives.

Source: Fox Business, "Debt and Divorce: 5 Steps to Make a Clean Credit Split", Dawn Papandrea, July 11, 2014

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