NJ Divorce Mediation and Debt

In today’s economy, many of the couples we see at Equitable Mediation Services come to us with a rather bleak financial picture and it’s no surprise given the news we hear every day.  With jobs hard to come by and the housing market still suffering losses, many divorcing couples are faced with the unenviable task of dividing liabilities rather than assets and are finding coming to an equitable distribution agreement to be more difficult than in years past.  Typically divorcing couples expect that once they “clear the decks” and sell the marital home, each of them will have a lump sum of cash to start over but sadly with today’s housing market, it’s usually not the case.  As a New Jersey divorce mediator the Memorandum of Understanding (MOU) I am drafting for client couples typically contains a balance sheet which lists all of the couples assets and liabilities and shows how each will be divided.  Think of it as a “divorce mediation worksheet” that outlines your overall financial picture as a married couple.  Working together, we discuss how each of the assets and liabilities will be divided and work to come to a fair and equitable agreement that each of you feels meets your needs and goals as you move forward into your new separate lives.  But what happens when all you have left is debt and neither of you wants to move forward or one of you feels you should get all the assets while the other is left with all the debt?

A simple rule of thumb when it comes to equitable distribution is with the asset, too goes the debt.  For example, let’s say a client couple owns a home jointly and has a mortgage on the property.  If during equitable distribution discussions, it was agreed by both parties that the wife was going to get the marital home as part of the settlement, then with the home would also go the responsibility of the mortgage.   On the balance sheet, we would then use the market value of the marital home and list that in the assets column and the take the outstanding balance of the mortgage and list that in the liabilities column.  The difference is what the wife received in equitable distribution.  As we previously discussed, sometimes the value of the home is “underwater” whereby it’s market value is less than what a couple owes on it.  In this case, the client couple would also need to discuss if the wife needs to be compensated with some other assets (or similarly trade off some other liability) in order for the couple to agree the equitable distribution is fair and equitable.  Remember: equitable distribution does not necessarily mean one party will receive a positive asset or cash it just means that each party has what they consider to be a fair and equitable distribution of both marital assets and liabilities, even if that means you are both in a negative equity position. Confused?  I could see why but don’t be.  As a New Jersey divorce mediator, it is my job to help you and your spouse sort through all of your assets and liabilities and draft an agreement that allows each of you to move on with your lives even if it means coming up with a creative solution that only mediation can provide.

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Joseph Dillon is a Professional Accredited Divorce Mediator in NJ and the owner of Equitable Mediation Services a New Jersey divorce mediation practice serving Northern and Central New Jersey, Somerset, Mercer, Middlesex, Essex, Morris, Monmouth and Hunterdon counties including the towns of Edison, Parsippany, East Brunswick, West Orange, Bridgewater, South Brunswick, Hillsborough, Livingston, Randolph, Maplewood, West Windsor, Summit, Plainsboro, Millburn, Morristown, Montgomery, Madison, Readington, Branchburg, Warren, Princeton, Metuchen, Lawrenceville, Pennington, Short Hills, Bernards, Bedminster, Colts Neck, Holmdel, Roseland, Montclair and surrounding areas.