What Happens to Credit Cards in DivorceFebruary 8, 2011 - 8:56 am
In divorce, the two parties will work on splitting up everything. That includes the credit card debt. Managing joint debt after a divorce can be difficult and one spouse can use the joint credit cards to hurt the other spouse. If you’re going through a divorce, be careful about how you handle your debt.
Responsibility for Credit Card Debt
From the credit card company’s perspective, the person who’s responsible for the debt is the person whose name is on the agreement. If you held your cards individually, then you’ll continue to be responsible for the balance even after the divorce. The same thing goes for your spouse’s credit cards. The cards the two of you hold separately won’t affect the other person’s credit record.
The hard part about managing credit cards in a divorce is when you have joint cards – cards that have both spouse’s name on them. Even though the divorce decree may say that one spouse is responsible for the payments, companies still hold both spouse’s liable. If your spouse doesn’t make the payments, your credit rating is affected and vise versa.
If the ex files bankruptcy for their portion of the debt, then they’re no longer responsible for making payments. Instead, you will be on the hook for all the debt payments, regardless of what the divorce decree says. The credit card company will come after you for payment. Worse, if your spouse was getting the credit card statements, you may not have a clue about any late payments or bankruptcy until the credit card company finds you and contacts you.
You could use the court to force your ex-spouse to pay you back for the debt, but that means going back to court and paying more court costs. Sometimes it’s easier and cheaper just to pay it yourself.
Handling Credit Cards in Divorce Situations
There are a few things you can do to avoid issues with joint credit card debt. If possible, the two of you could pay off the debt before the divorce ends. That way, once you’re divorced, there are no joint credit cards to worry about. If you don’t have the money to pay off your credit cards, consider dividing up the debt and using a balance transfer to transfer your part of the debt to a credit card in your name only.
Once the credit cards are paid off, cancel them so neither party has the ability to keep making charges that the other person would be jointly responsible for.
If the two of you decide that you’ll have to file bankruptcy to get rid of these debts. Consider filing a joint bankruptcy while you are still married. That way, you can get rid of your joint debts and go into your new life debt free.
If you come out of the divorce with joint debt obligations, continue to monitor the credit card statements and your credit report even if the other spouse is responsible for making payments. Your credit is on the line, too, so you have to do what’s necessary to make sure payments are made until the debt is completely repaid.