Robert A. Bonavito, CPA PC

New Jersey Divorce Accountant Discusses Dividing Up Debt

Video Transcript 

My name is Robert Bonavito, New Jersey Forensic Accountant. This video is a part of a series of videos where I discuss forensic accounting topics for educational purposes only. If this was a litigated matter, I would take a different approach and have different conclusions based on different facts and circumstances.

My name is Robert Bonavito, New Jersey Forensic Accountant and today we're gonna discuss do we divide up the assets in a divorce. When you're getting divorced, eventually, you'll start thinking about the financial issues. That doesn't come right away, but how do you divide up the assets? You got school loan debt, you have the mortgage, you got credit card debt, you got car loans, you have other stuff that you borrowed. Maybe there's a business that's going bankrupt. There's all kinds of debts out there. And what we like to do is we like to classify the debts.

We have debts that existed as of the date of marriage. We have debts that existed the date the complaint was filed for divorce. We have debts that exist when you are officially divorced. And what we do is we kind of classify these debts into different buckets. Generally, the debts that were recorded before the date of marriage are gonna stay with you. So for example, if you have a student loan and your spouse has a student loan, those are your loans unless you co-signed or something for it. If your credit card debts or some other debt, that usually resolved after the divorce.

The debts you incurred during marriage are probably 50/50 unless there's some type of agreement written into the divorce decree. The questionable debts happen after the date of complaint because lots of times we'll see one spouse will run up all kinds of crazy credit card bills and fly all over the place on vacation and spend all kinds of money for no reason. And those debts we have to take a look at. If you see that happening, you wanna talk to your lawyer and say, "Hey, listen, we got a $25,000 credit card bill from American Express. My spouse ran up this crazy bill." And you may want to try to address that right away because those debts, it's like a questionable area from the date of complaint to the date of divorce. And a lot of times the money spouse is gonna be responsible for those so you wanna be careful and make that part of the divorce settlement if one spouse is running up the debts.

So generally, my advice on debts is get good backup, understand what you owe, when you owe, what kind of rates and interests. Try to keep your credit rating. Make sure that you make the payments. Understand who is charging what on what cards. If you can get rid of cards, which is great because you really can't sign a mortgage if there's a line of credit tied to the house. Be very careful. I've seen once where the spouse will use the checks from the line of credit to buy all kinds of crazy things, and you don't have any idea what's going on because if you're not living in the house and bills are coming there, you don't know that your spouse spent $200,000 from the line of credit. So just be real careful. Call the banks, call the credit cards, talk to your lawyers, see if you can get your name off some of these, maybe cancel the line of credit, whatever you can do. But generally, that's how debts are handled. If you have any questions concerning this, feel free to email them.

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