What Happens to Credit Card Debt in Divorce?
Over your time of being married, you’ve collected many things together: Shells from the beach on your honeymoon. Postcards from vacations. Favorite Christmas ornaments… However, perhaps you, like many other couples, have also collected credit card debt. If you are now facing the daunting reality of divorce, you may wonder what will happen with that credit card debt in divorce proceedings.
The answer to that question will depend on several variables, including the state you live in, if the card is in your name, whether it is a joint credit card or you are a cosigner, or if the debt was assigned to you in a divorce proceeding. You will need to have that conversation with your attorney, but here are a few factors to consider as you’re dealing with credit card debt in divorce.
Creditors Don’t Care Who Has to Pay
You may be feeling the heartbreak of your divorce, but you’ll have to accept that creditors are going to seem heartless towards your situation. Lynn Wardle, a professor at BYU Law, points out that creditors are Constitutionally protected when it comes to getting involved in divorce proceedings, saying, “The Constitution protects against the ‘impairment of contracts’ such as the contract between the credit card company and the borrowers… Additionally, the credit card companies usually are not parties to the divorce action and it would deny them due process to take their valuable financial rights in those circumstances.”
Marsha Garrison, a professor at Brooklyn Law School, agrees, “Bottom line, a divorce court or divorce agreement may determine obligations of spouses toward each other regarding joint debts, but not creditors’ rights regarding collection from debtor spouses.”
Credit card companies, then, will legally expect to get paid in a timely manner, and they don’t care which of you does it. They are within their rights to hold you responsible for any credit card debt in divorce if your name is on an account. Even if your former spouse is “supposed to” pay the debt, if they don’t, your credit can be damaged and collection activities can be directed against you.
Harsh? Maybe. But if you have an agreement with a credit card company – no matter what is happening between you, your spouse, your divorce attorneys, or the judge – that creditor will hold you to it. That being said, although you and your spouse will ultimately be liable for making good on your payments, it is possible that your bank may be willing to work with you to adjust payment due dates during this difficult time. Speak with your banker regarding options that may exist.
What’s Mine is Mine…
Understandably, if you and your partner have credit cards in your own names, you will each be responsible for your own as individuals. Your divorce proceedings will not affect that reality. This is the case in most states (called common law states).
Debt incurred during the marriage is typically a joint responsibility. This is notable when both parties are co-signers on credit cards. It may not apply if one spouse is just an additional cardholder, with the card under the other spouse’s name.
What’s Ours is Ours…
Shared accounts – cards that contain the names of both parties as primary account holders or as cosigners – can affect the credit standing of both users. In these cases, both you and your spouse are equally liable for the debts incurred. Plan to discuss these debts with your lawyer during the divorce process. You may also want to file documentation with the courts early on regarding joint credit cards. In this way, you can prevent your spouse from intentionally (or unintentionally) running up debt that you might ultimately also be responsible for.
Ellen Craine, a lawyer and social worker who runs Michigan-based Craine Mediation, recommends another way to prevent additional joint debt, “Set a date after which agreed-upon portions of joint debt are to be transferred onto new cards in each person’s name and joint cards canceled.”
Protect Yourself from Credit Card Debt in Divorce
Knowing that credit card companies can pursue you to pay jointly incurred debt that your former spouse doesn’t pay, it’s important that you secure your finances and purposefully protect yourself during the divorce process:
- Strive to leave your marriage with no joint debt
- Inventory your wallet
- Cancel joint credit cards
- Pay off debts prior to the divorce (if possible)
- Transfer debts to cards owned solely by the party responsible
- Change your personal bank account passwords
- Remove your ex-spouse as an authorized user on personal credit cards
- Change personal account numbers.
Communication is Key
At the end of the day, the priority in dealing with credit card in divorce is your financial standing. There may be times that you’ll need to choose to put your pride aside in order to avoid costing you more in the long run in finance charges, credit score damage, and peace of mind. Alabama Law Group is here to be on your side during this time. Connect with us today to get the help you need.
The preceding is being provided for informational purposes only and is not intended as legal advice. Consult your attorney with specific questions regarding your personal or joint credit card debt in divorce.