By: Justin M. Smigelsky, Esq.
Under New Jersey law the Court has the authority to distribute all eligible “property” that was “legally and beneficially” acquired during the marriage or civil union as part of “equitable distribution.” New Jersey law favors an expansive interpretation of the word “property” in the context of equitable distribution – pensions and retirement plans, real estate, household furnishings, the lost-earning component of a personal injury settlement, an interest in a business or partnership, stock options, frequent flyer miles, lottery winnings, cash surrender value of life insurance policies, and, as is often the case, debts and obligations are equitably divided in New Jersey upon divorce.
Pursuant to New Jersey law, the Court has the authority to allocate the divorcing parties’ responsibility for debt regardless of which party is otherwise legally liable. Even if one party incurs the debt, if same is for a marital or family purpose, the parties will ordinarily be jointly responsible subject to the Court’s authority to equitably allocate the debts.
Allocation of debts and obligations upon divorce in New Jersey is a fact-sensitive analysis that depends upon the circumstances of each case. For example, if a debt is incurred due to intentional dissipation of a marital asset, it is not equitable to allocate such debt to the innocent spouse – this may be considered “a fraud on marital rights.” When a debt is challenged as being non-marital, the burden is on the party owing the debt to demonstrate that such debt is traceable to a marital asset or purpose. In making such a determination, the Court will analyze the reason for which the debt was incurred and the manner in which the funds generated were spent. The Court will also analyze when the debt was incurred as well as whether the debt was incurred due to a party’s unintentional fault – as examples of New Jersey case law, gambling debt and motor vehicle surcharges incurred during the marriage have been allocated to the party at fault even though incurred during the marriage.
Additionally, even if debts are deemed marital, it is possible that the debt is allocated proportionately to each party’s respective income or as otherwise agreed by the parties. In some instances, one party may agree to assume liability for a greater portion of the marital debt in exchange for his or her receipt of other property.
If you have any questions in regards to divorce in New Jersey, equitable distribution, or family law, you may wish to consult with an experienced New Jersey family law attorney. This article is for information purposes only, and is neither legal advice nor the creation of an attorney client relationship.
Justin M. Smigelsky, Esq. – Timothy J. Little, P.C. – All rights Reserved