Where Are Your Credit Card Obligations After a Divorce?
Divorce brings troublesome and emotional issues to a head. In that respect, the way you and your spouse have been handling your financial affairs will undoubtedly play a role. What happens to certain debts (like credit cards) depends on several factors so read below and learn what your credit card obligation will be after the divorce.
How Credit Cards Fit Into the Marital Debt Category
Not everything you've charged on your cards is part of the divorce. You and your spouse's purchases are either marital debt or separate debt. If it's separate debt, it's not part of the divorce. Separate debt includes any purchases made prior to the date of marriage. If the transaction occurred prior to marriage, that portion of the total debt is not marital debt – it's separate debt. However, just because a transaction occurs after the date of the marriage does not mean that it's marital debt.
Divorce Models
In the U.S., states follow either a community property model or an equitable distribution model. About nine states adhere to community property rules and a few states allow the divorcing parties to choose between the two models. Many states use equitable distribution to assign debt. In both cases, the only part of a debt that is pertinent is marital debt, not separate debt. That being said, if one divorcing spouse can prove that marital debt occurred against their wishes, it might be ruled to be separate. An example of that might be gambling debts or fraudulent use of a credit card.
Community Property Laws
This model assumes that the couple is of one mind. That can mean that all credit card debts are divided equally regardless of who used the card, who held the account, or what was purchased with the card. This can seem absurdly unfair to the spouse that used little to no credit since they are now 50% responsible for their spouse's credit card spending.
Equitable Distribution Laws
Here, debt is owned by the person responsible for using it. If your name is on the card, it's your debt. If your name is attached to an account but you seldom used the card, the debt will need to be examined and divided. Equitable distribution means assigning debt based on who used the card and for what.
Tips for Divorcing Couples
- Debt should be decided by the couple when possible. Leaving it up to the judge can cost more money and take more time to litigate. Whatever agreement you come to for dealing with credit card debt, the judge is likely to approve it if you both agree on it.
- Try to pay off as much debt as possible before you file for divorce, particularly joint debt, especially if you live in an equitable distribution state.
- Get a legal separation agreement in place when you separate. This will make it so you aren't responsible for your spouse's spending during that time period.
To learn more, talk to your divorce lawyer about credit card debt.