Most married couples in the U.S. accrue staggering amounts of debt during the span of an average marriage. Debt is one of the main issues that couples fight over, and maybe even eventually divorce over.
If the debt is bad during the marriage, it’s nearly unbearable during a divorce. Debt, even credit card debt, is split up during a marriage between the spouses according to state law.
However, the debt issues can be negotiated during divorce proceedings. it’s important that one should make herself financially very well prepared before signing the divorce papers.
Generally, your liability in the credit card debt upon divorce depends on
- Which state you live in
- Whether the expense was made by you
- Whether you are a co-signer
- And, whether the debt has been assigned to you as part of the divorce proceeding
Read below to learn more about what to do with credit card debt if you are undergoing a divorce:
Credit Card Debt Responsibility Depends on the State Law
Who is ultimately responsible for credit card debt depends on the marital property law of the state you are filing for divorce in.
If you are divorcing in a community property state, like Arizona, then the credit card debt becomes the responsibility of both parties.
A judge will evenly split up the credit card debt between the spouses, regardless of who acquired the debt, according to Canterbury Law Group.
If you are divorcing in a non-community property state, like Missouri, debt from credit cards or joint accounts will be equally distributed based on who made the purchases.
However, there are notable exceptions. If a judge sees that one spouse used a credit card in a manner that did not benefit the marriage, such as for paying a gambling casino, then that amount might be ruled as that spouse’s sole responsibility.
Cancelling Joint Accounts is Recommended before a Divorce
Cancelling joint credit cards is recommended by some divorce lawyers. It prevents one spouse from accruing too much debt.
Divorcing couples can decide to cancel joint cards and get them under a single spouse’s name, especially in community property states, to prevent one spouse from becoming too indebted.
Pay Off Joint Cards Using Joint Accounts
The best way to handle credit card debt during a divorce is to settle debts before going to court, advises Canterbury Law Group.
If the debt is coming from a co-signed credit card, use joint accounts to pay off the debt before the divorce. It’s recommended to seek help from credit counselors here as well.
Separating debt during divorce proceedings is extremely complicated. Also, the creditor is not bound by the divorce decree, and may still hold both spouses responsible.
Therefore, seriously consider settling credit card debt before filing for divorce.
Consider Bankruptcy if the Debt is Just Too Much
If the debt is too staggering and it is impossible to pay it off, consider filing for bankruptcy before you file for a divorce. Chapter 7 bankruptcy allows unsecured debt like credit card debt to be discharged by a judge.
That’s a good option for those who are nose-deep in credit card debt. However, when filing for bankruptcy, the judge may also order a payment plan for non-dischargeable debt.
The couple will have to stick to this payment plan even after getting a divorce. But, you can come back to your feet, if you manage your finances well.
Credit card debt situations can vary from case to case. Therefore, do hire a good divorce lawyer to discuss all options available to you.
The above are only guidelines about general aspects of handling credit card debt during a divorce. Consult with a lawyer for specific advice regarding your case.