Who Gets the Credit Card Debt in a Divorce?

/ BY / Managing Debt

One of the most difficult and time-consuming aspects of a divorce is figuring out how to divide everything up-including debt. This can be a tricky subject during divorce, however, especially when credit cards are in both spouses' names. If not handled properly, your credit score could suffer and you could be saddled with debt you're not responsible for.

Divorce and Debt Responsibility

If you are getting divorced, the credit cards you will need to worry about are the ones where both you and your spouse are co-signers on the card. In the eyes of credit card companies, you are both responsible for the debt and if the bill isn't paid, collections will begin on both of you. This is true even if you never charged anything on the card; most states agree that debt incurred after a marriage is the responsibility of both parties.

Keep in mind that this does not include cards in which a spouse is an authorized user. If your name is on the card and your spouse is listed as an authorized user, or vice versa, the cardholder and not the authorized user is ultimately responsible for the debt.

There is an exception to this general rule for residents of community property states. If you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin, both partners are responsible for all debt incurred during a marriage whether by one or both parties.

How to Divide Credit Card Debt

The first thing you should do when you decide to divorce is cancel all joint accounts. This prevents one spouse from running up the other card and leaving the other with the bill. Put the cards in your own name, and the way the debt is divided will be determined during the distribution of marital assets.

Ideally, you can divide up the credit card debt amicably during a divorce. Here are a few options to help:

  1. Pay off all credit card debt. Ideally, you should pay off all joint credit card debt before your divorce is finalized. If you have a joint savings account or plan on selling your home, use this money to pay off all joint credit card debt. This way, not only will you no longer have debt and interest payments looming over your head, but it will make the division of any existing debts or loans easier.
  2. Transfer balances from a joint account. If you have joint credit card debt and come to an agreement on a division of the balances, you can close the joint accounts and transfer the agreed-upon balances to new accounts in your individual names. This may not work, however, if one spouse is unemployed or has poor credit, as both parties will need to qualify for the line of credit.
  3. Request account statements. For closed joint accounts, request that statements be sent to you as well. Even if your spouse is responsible for paying the bill on the card, it's a good idea to monitor whether the bill is being paid or not to protect your credit. In the event you do have to pay the bill, keep track of dates and amounts paid should you try and get the money back in court.

Regardless of how you decide to divide your credit card debt, it's important to keep accurate records and make sure everything is clearly written in your divorce agreement.

Dealing with finances after a divorce is never a pleasant experience, but these tips will help you protect your credit and avoid paying for debt that you’re not responsible for after a divorce.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.