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How Are Marital Debts Divided?

In a previous blog, we discussed how a business is equitably divided upon divorce. However, the process of equitable distribution is not limited to property and assets that the couple acquired during their marriage. Courts must also determine how marital debts are treated upon divorce.

Equitable Distribution in General

When a married couple acquires property, they essential share ownership rights to such property. Sharing ownership is not problematic for the couple when they live together. However, when a couple decides to get divorced and live separately and apart, it is not feasible for them to continue sharing their marital property as they did when they were married.

As a result, the couple must decide how to divide marital assets between themselves upon divorce. If the couple cannot agree on how to divide these assets, the court must equitably distribute their marital assets.

However, an “equitable” distribution of marital assets does not always mean that the court will “equally” divide marital assets between the parties. Instead, a court must consider the specifics of each case to determine a split that is fair and “equitable” under the circumstances.

Among the factors that courts will consider for purposes of equitable distribution include the marital debts that the marriage incurred.

Equitable Distributing Marital Debts

In general, courts consider both the property rights and financial obligations of the marriage when deciding issues of equitable distribution in divorce cases.

Generally, debts that the couple incurs during the marriage are characterized as marital debts that are subject to equitable division in a divorce. In contrast, liabilities that a party incurs before getting married are treated as their separate nonmarital debt and are not necessarily allocated between the parties.

Marital debts may apply to the total value of all marital property when determining an equitable distribution of assets and liabilities. Alternatively, New Jersey courts can allocate debts separately, resulting in a reduced property award.

Bankruptcy and Marital Debts

When a person files for bankruptcy, they may be entitled to have certain debts discharged, even if the party to whom the debt was owed hasn’t received a dime from the petitioner. Furthermore, filing for bankruptcy halts lawsuits for the collection of certain liabilities.

However, the federal bankruptcy code recognizes exceptions to bankruptcy relief in family cases, including:

  • Paternity cases
  • Spousal and child support matters
  • Child custody and visitation actions
  • Domestic violence proceedings
  • Proceedings concerning the collection of spousal or child support
  • Enforcement actions regarding the collection of spousal or child support

However, bankruptcy does apply to divorce proceedings concerning the equitable distribution of marital debts and liabilities. The exceptions to bankruptcy belief indicate federal public policy emphasizing the importance of domestic support obligations, as those matters involve a person’s legal duty to provide for the financial welfare of their children and spouses. As a result, bankruptcy will not relieve a person of such responsibilities.

Conversely, property division issues in a divorce proceeding are subject to bankruptcy relief. This is because marital debts typically involve repayment obligations that arise from contractual obligations rather than legal ones.

Learn More by Calling Lane & Lane, LLC

If you have more questions and concerns about your legal rights and options as they pertain to a family law issue under Ohio law, please contact Lane & Lane, LLC. Our legal team is dedicated to guiding you through the complicated legal and financial issues connected to family law disputes, including divorce.

For an initial consultation, please contact Lane & Lane, LLC at (908) 259-6673 or contact us online to complete a consultation request form.