One of the four topics we cover in mediation is that of equitable distribution or as it's formally known: "the equitable distribution of marital assets and liabilities." And while most of the clients enjoy the division of assets, when it comes to diving the debts, that's an entirely different story. It used to be a divorcing couple would sell their house, pay off their existing debt and have some cash left over to start anew but given today's economy and housing market realities, those days are long gone. Divorcing couples in New Jersey need to understand that when it comes to equitable distribution, there is a greater likelihood they will be saddled with debt than rolling in riches. Here are three tips to keep in mind when looking to divide debt during divorce mediation.

A common thing I see is couples with large amounts or credit card debt spread across multiple cards. To make the process of assigning debt easier, couples decide who is going to be responsible for which card so that the total debt each party takes is deemed by them to be fair and equitable. Ah but here's the catch. Say a couple has $20,000 in debt. $10,000 on a Visa card at 10% interest and $10,000 in debt on store cards such as Macy's, Home Depot, etc. at 23% interest, the person taking the higher interest rate cards is actually going to wind up taking on more debt in the long run if they continue to pay them off over time so when dividing debt, pay attention to not only the outstanding balance but the interest associated with it as well.

It used to be you could simply call up Discover and ask to sign up for one of their 0% interest for 12 months balance transfer deals and that would at least help you bridge the gap between high interest cards and getting your life under control but not anymore. With lenders tightening credit, you may have more difficulty getting the necessary credit limit to cover all of the debts you agreed to take on as part of equitable distribution and with the reduction in housing values, tapping into your homes' equity may not be a realistic solution either.

I know it's not ideal but taking a loan against your 401(k) can sometimes be the best way to manage your debt situation in the short run. A common retort I hear from clients is "I don't want to sacrifice my retirement" which is certainly a valid statement but if you're drowning in high interest debt and can get out from under it by taking a loan from yourself and paying yourself back with interest, isn't that better than letting the interest go to the credit card company? As a New Jersey divorce mediator, I see a fair number of clients "saving for a rainy day" but unable to live in their present. Be realistic as you may need to temporarily suspend your 401(k) contribution and get creative to free capital up to live.