Who is Responsible for a Credit Card in Divorce?

Divorce does more than end a marital contract. It also severs most of the couple’s financial entanglements — most being the keyword.

Debt is stubborn; as surely as it dogs survivors after a death in the family, so does it cling to ex-partners going separate ways.

How it gets sorted depends on a variety of factors, including where the divorced couple lives, whose name is on what documents, and how and when debts were acquired.

“Divorce is emotionally and financially complex, and credit card debt is one of the most tangled issues to sort out,” says Melissa Murphy Pavone, a certified financial planner and founder of Mindful Divorce Partners. “Understanding who is responsible for what is crucial to ensuring a fair settlement — and avoiding financial surprises down the road.”

Is a Spouse Responsible for Credit Card Debt?

Geography, of all things, is a significant factor in determining who gets what, as well as who is responsible for what, in a divorce.

The responsible party for credit card debt hinges on the state in which the divorce occurs; whose name is on the account(s); and when the debt was incurred. How all of that plays out determines whether the onus falls on the husband or wife … or both!

“If you want to ensure fair treatment in your divorce, you should document everything,” Raleigh, N.C.-based divorce attorney Jonathan Breeden said. “Get everything in writing, know what’s in your name, and don’t assume your spouse is being 100% transparent.

“One of the biggest surprises in divorce is hidden debt —credit cards, loans, or lines of credit you may not even know exist. Pull your credit report and ask for full financial disclosures. If something doesn’t add up, don’t be afraid to push back.”

When the debt was accrued is a pivotal factor. Debt brought into a marriage often is treated differently than debt incurred while the couple is together.

Marital Debt Requirements by State

Generally, divorce law falls into two broad categories: Community property and equitable distribution.

In equitable distribution states, the court strives to mete out marital property (including marital debt) fairly, if not necessarily equally.

In community property states, marital property (including marital debt) tends to be split equally between the spouses.

The nine community property states are:

• Arizona
• California
• Idaho
• Louisiana
• Nevada
• New Mexico
• Texas
• Washington
• Wisconsin

Wait. There’s more: Alaska, Florida, Kentucky, South Dakota, and Tennessee allow divorcing spouses to choose a community property framework if they meet stipulated requirements … which vary by state.

Keep in mind that certain debts acquired by a spouse before the marriage (student loan debt, for instance) typically remain with the spouse who incurred it.

Moreover, in community property states, the court may start with a presumption that all property is community property, leaving the burden on the spouses to argue which specific pieces of property are separate.

By contrast, in equitable distribution states, the court will hold you liable for the following:

• Credit card debt held solely in your name.
• Joint credit card debt in which both your names are on the account.
• Credit card debt on an account you co-signed for your spouse, even if your name does not otherwise appear.

Tips for Managing Credit Card Debt After Divorce

The best divorce, if such a thing exists, is a no-debt divorce. If, without making unreasonable sacrifices, a couple can zero out their assorted credit balances, they’ll have cleaner futures when they part ways.

Otherwise, take practical steps to make certain you can manage any assigned debt in your post-divorce life, including:

• Review your credit report. Examine your status with each of the Big Three credit reporting agencies (Experian, Equifax, TransUnion). Check your status across the board, looking for errors.
• Contact your creditors about working out repayment plans, lowering interest rates, or agreeing to settle for less than the balance owed.
• Create a new budget. Be realistic. Track your spending, paying particular attention to places you can cut costs. Examine opportunities to increase your income.
• Can you consolidate debt? Consider a personal loan to gather all your credit card debt into a single, lower-interest payment. Look into zero-interest transfer credit cards. Or talk to a nonprofit credit counseling agency about other ways to reduce your debt.

How Will This Affect My Future?

Divorce proceedings do not directly affect your credit report or your credit score. Marital status doesn’t appear on credit reports; your credit score is separate from your ex-partner’s.

However, because the outcome of divorce routinely results in the divvying up of joint accounts, there may be an indirect impact. Yes, some aspects of your marriage may last well beyond the final decree.

“Check your credit report,” Murphy Pavone says. “Get a full picture of all debts in your name before negotiations. Even if your divorce decree assigns debt to your ex, creditors can still come after you if your name is on the account. It’s crucial to remove yourself from joint accounts or ensure the debt is refinanced solely in your ex’s name.”

Joint accounts with your ex, for instance, could influence both your scores, depending on their credit usage and whether they’re punctually paid. If you co-signed for your spouse, or you’re listed as an authorized user, these also will appear on your credit report as long as the accounts remain open.

Also, it doesn’t matter if the divorce decree assigns a debt to your ex. If your name remains on the account and payments are late or are missed altogether, or the balance skyrockets, your credit could be harmed.

“Remember that a divorce is a contract and court order between two parties; it cannot bind other parties,” Herndon, Va.-based bankruptcy attorney Ashley Morgan said. “If Spouse One has a credit card that Spouse Two is ordered to pay as part of the divorce, the credit card company still can collect from Spouse One. … A credit card company does not follow a divorce court order about liability.”

FAQs

Who is responsible for paying off joint credit card debt in a divorce?

The short answer is: It depends. Divorcing partners can negotiate the distribution of debt. However, when left to the court, debt does not necessarily follow the partner who incurred it. Instead, with your state’s divorce laws providing the guard rails, how debt is distributed may be decided in the course of divorce proceedings. The type of debt, as well as when and how it was incurred play key roles. Much also depends on whether the divorce occurs in a community property state, or an equitable distribution state.

Can one spouse be held responsible for the other’s credit card debt?

How debt is parceled out can be negotiated. When left to the court, state law prevails. Divorces in community property states typically result in a 50-50 split of marital debt — that is, debt incurred during the marriage, without respect to whose name is on the account of who made the purchases. In equitable distribution states, courts weigh each spouse’s income, capacity for future earnings, and financial situation in an attempt to achieve a fair division of debt. In either case, yes, one spouse could be held responsible for the other’s credit card debt.

What happens to credit cards that are jointly owned during a divorce?

Unless acted upon to alter their status, jointly owned credit cards will remain exactly that: jointly owned. The best course of action is cooperation. Each ex can ask the creditor to remove their name from the account, or close it. One spouse can agree to have the other’s name removed, or together they can ask for the account to be closed.

Can a divorce decree protect me from being pursued for joint credit card debt?

No. Creditors are no respecters of divorce decrees. As far as they are concerned, if you and your ex acquired debt as a team, you both are equally game on the subject of satisfying that debt. The judge may have assigned responsibility for a jointly held card to the other party, but if (s)he fails to meet the demand, you can wind up on the hook.

How can I protect my credit during and after a divorce involving credit card debt?

You will have to be proactive to protect your credit during and after a divorce. Some of the steps you should take include:

• • Communicate with your ex-spouse. If your former partner is assigned an account that bears your name, as cordially as possible, remind him/her that it’s vital for both of you that things are managed responsibly and paid punctually so nobody’s credit is harmed.
  • Amend account ownership. If you want your name off a joint account, or you want the account closed, make that part of your negotiations with your soon-to-be-ex. You can ask the creditor, but because you’re the backstop on getting the debt repaid, you’ll likely need your ex’s cooperation.
  • Control what’s controllable. Your ex is going to do what your ex is going to do. But you can make certain your payments are regular and punctual, which helps your score. And paying down debt is always a winning formula.
  • Get out front on bankruptcy. Frequently, divorce and bankruptcy go hand-in-hand. Indeed, financial trouble is a leading cause of marriage failures. Depending on the circumstances, the superior gambit may be to file for bankruptcy before divorce. One upside: You wipe out all marital debt. The severe downside: Your credit, as well as that of your ex, will crash.