Credit Card Debt In DivorceDividing credit card debt in divorce can be a sticky issue. Unfortunately, you may find yourself responsible for debts that your spouse ran up, yet you get no benefit from it, as outlined by the following question: What is the best way to split the credit card debt? G's Question: We are preparing separation agreement, and have everything figured out except the credit cards. We need to know if closing all the joint accounts is the best thing to do. Also, what is the best way to split the debt in our settlement? Timothy's Answer: Maintaining credit held in a joint name is only asking for financial trouble down the road. It is in your best interest to pay off the debt immediately! We recommend you formally write your creditors to notify them of your impending divorce. Request they close the account, cancel the card and ask for a current statement so you have full knowledge of your joint liability. Send the letter certified mail and retain the delivery receipt in your records. And, if you haven’t already done so, establish a credit card in your own name as soon as possible! How to split debt is an issue all divorcing couples face. Whether it is credit card debt or any other form of debt, the simple fact remains it must be divided. It is best to pay off all joint debts before the marriage ends, but we recognize this is not always an option. There are many ways to divide debt. The simplest would be to divide the debt equally between the two parties. While fair, this is often not the best advice as one party may struggle to make the minimum payments on the debt. If there are liquid assets in the marital estate, such as cash held in a savings account, you may want to consider using these funds to pay down or hopefully eliminate the debt so each party can move forward free from this financial burden. Another option would be to shift the debt towards the party who has a greater ability to pay when the marital assets are being divided. Intuitively this makes sense, however the ex-spouse would still have a contractual obligation with the credit card company to pay the debt. » Return to top Can I get this debt out of my name? Nancy's Question: How do you handle credit card debt in your name, but your spouse was the one who ran up all the debt? Credit was taken out under my name to get the better rates, but he needed it for his use for excess gas consumption on his job that was not covered by his employer. He also used it setting up a home office, in addition to other things unrelated. How do I get this debt out of my name, or make him responsible for paying for it? Timothy's Answer: You are in quite an unfortunate situation due to your kind act of trying to assist your former spouse with his expenses. Credit card companies do not care who the purchases were intended for nor who benefited from them. When you established credit in your name, regardless of the reasons you did so, you are solely responsible for any purchases and therefore all liabilities. Credit card companies will not allow you to "switch" the account holder from one account holder to another. Depending on your relationship with your former spouse, you might consider having him establish new credit in his own name and then do a "balance transfer" from your account to his. This is not always an option if the two of you are not in agreement of what his liabilities are, or if he has poor credit. One option is to file in small claims court in your state. The benefits to you are it is easy to do, cost very little or no money to file, and you might be able to get a judgment in your favor. Many times small claims are settled in mediation which will allow you to have a voice in the process. The downside is, depending on how much you think he owes you, there are limits to the amounts you can file for in small claims. Another option is to seek legal action against him. However, legal fees can get quite expensive and you might not have the success you want in the end. Let this be a lesson to you going forward. Your kind acts have put you into a
very difficult position leaving you solely responsible for all the debt assumed.
While your husband got a better rate, you are now left holding the empty bag. In
addition to being solely responsible for all the debt, your credit is at risk if
you do not make all the payments and on-time. In the future, it is best the keep
your financial relationship separate from the emotional one you have with any
new partner.
Related Articles: Timothy McNamara is a certified divorce financial analyst, specializing in the financial issues that couples and individuals face when their marriage ends. Having gone through a divorce himself, he is passionate about helping people understand and manage the complicated financial issues divorcing couples often face. This column is not intended to take the place of professional advice, but rather to provide financial information about the various issues that arise in a divorce. For specific recommendations concerning your situation, you should retain an experienced certified divorce financial analyst who can answer your questions based on the details of your case. WomansDivorce.com, Timothy McNamara, and Tracey Manzi disclaim any liability from any claim arising from any information contained in this column. This column is not a substitute for professional advice. Divorce
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