New Jersey Appellate Court Addresses Division of Assets and Debt After Divorce

Although it is generally the case that the assets obtained by a couple during a marriage will be divided equally in the event of a divorce, not as many people understand how debts that are assumed during a marriage are to be divided. Generally, debts assumed by either party during a marriage are divided equally at the time of divorce. A New Jersey Appellate Court recently addressed a case where a divorced ex-husband failed to pay tax debts as agreed to in the divorce settlement.

The plaintiff in the recently decided case is a man who filed for divorce from the defendant. The parties agreed to a settlement without a divorce trial, which was entered during the Fall of 2020. According to the facts discussed in the appellate opinion, part of the divorce settlement involved the plaintiff liquidating certain retirement accounts and using the proceeds to pay off over $100,000 in unpaid taxes to the federal and state governments.

After the settlement was finalized, the plaintiff liquidated the retirement accounts and entered into a payment plan to repay the tax debts. The plaintiff then used some of the money from the retirement accounts to pay off delinquent medical bills for the parties’ son. Although the settlement agreement allowed the plaintiff to use retirement account proceeds to pay off these medical debts, the order was clear that the plaintiff needed to pay off the tax debts first.

Based on the plaintiff’s failure to pay the tax debts in full with the retirement account proceeds, the defendant filed a motion to enforce the settlement agreement. The family court granted the defendant’s motion and ordered the plaintiff to use the remaining money from the retirement accounts to pay the delinquent debt within 30 days.

The plaintiff appealed the family court ruling to the Appellate Division, arguing that his arrangement with the IRS to pay the debt in installments was sufficient to satisfy the settlement agreement. The appellate court rejected the plaintiff’s arguments, ruling that the settlement agreement was a clear contract between the parties and required the plaintiff to use the retirement account proceeds to pay the tax debts before anything else. The court also affirmed the family court’s decision to award attorney fees to the defendant for enforcing the settlement agreement. As a result of the appellate ruling, the plaintiff will be required to pay the IRS debt with any funds remaining in his possession from the retirement account liquidation.

Legal Representation for Complex New Jersey Divorces

If you are anticipating going through a divorce that involves significant assets or debt, the complexities of your financial situation can complicate divorce proceedings, often leading to unexpected and unfair results. Seeking qualified representation can help you to be sure you are treated fairly by the courts. The Law Office of Jeffrey R. Brown understands New Jersey family law, and we can help you protect your assets in the event of a divorce. The Law Office of Jeffrey R. Brown, Esq., LLC represents people throughout New Jersey. To schedule an initial consultation, contact us at 732-613-0066 today.


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