New Jersey is an equitable distribution states, which means that assets and debt acquired during marriage are split “fairly” during a divorce. By contrast, nine states in this country are community property states, which means that any assets or debt acquired during marriage are typically split 50-50 between the parties. Though the equitable distribution system can be more complicated in some ways, it does have its advantages.
For instance, in most community property states, if a spouse were to take out a student loan during the marriage, that loan would be considered the property of both spouses, and the amount would be divided equally between them in a divorce. By contrast, in New Jersey, and other equitable distribution states, student debt incurred during marriage will only be the responsibility of the non-borrowing spouse if that spouse co-signed the loan. One exception to this would be if the spouses consolidated their separate student loans into one.
In all states, student debt is generally considered separate property if it was incurred prior to marriage. Of course, nothing stops a divorcing couple from agreeing to a division of assets that is more favorable to one person than the other. For instance, if one spouse incurred student debt but was relying on the other as the breadwinner while going to school, the higher-earning spouse could offer to help repay some of the debt. This type of concession may give a spouse leverage on other terms, such as a child custody schedule.
There are many ways that assets and debt can be divided and distributed in an equitable distribution state. Couples who do not want to leave things to chance with a judge could consider hiring a family law attorney to help them negotiate a divorce settlement outside of court.