Credit Card Debt And Marital Debt: What To Know
The convenience of those little plastic cards can get anyone in trouble, but when a couple gets divorced, those credit card issues could really begin to be complicated. The division of debt means that a couple must make some decisions: to pay it off, to divide it, or to let the courts decide. Read on to learn more about how marital debt, such as credit card debt, is determined in divorce situations.
How debt is treated: In in the United States, the way unsecured debt is handled during divorce depends on whether the divorcing couple lives in a community property state or an equitable distribution state.
Community Property States: Only 10 states use this model, and debt (and property) is viewed as being owned by "the community," which, in this case, means the couple. In most cases, this results in the debt being split 50/50 by each party, regardless of who accrued the debt or whose name was on the account. Any debt burden held before marriage is exempt from this division, so past credit card statements may be subpoenaed to ascertain debt load on the date of the marriage. For couples living in community property states, the load of debt that your spouse has acquired, and for which you are now 50% responsible for, can come as a great shock.
Equitable Distribution States: This is, by and large, what the majority of states use for debt and property division. In this model, the party that "owns" the debt is responsible for paying it off. Even if the other spouse has use of a card from the account, the account owner is responsible for the debt. This card holding issue can work either as an advantage or a disadvantage. If you are the account owner that has provided your spouse with a card to use on that account, take steps immediately to cancel that card to prevent that spouse from running up charges before the divorce takes effect.
For couples who own joint accounts, the equitable distribution rules direct that the debt be divided as fairly as possible, and often that can come down to picking the debt burden apart to see who charged what. This can get both expensive (forensic accountants must often be employed to untangle the mess) and time-consuming. If the couple is willing, the judge may just split the debt down the middle.
Nip problems in the bud: The only way to ensure that credit card debt division doesn't become a contentious issue is to take care of it beforehand. Try to pay credit card debt off or at least come to an agreement with your spouse before you take it to court. To learn more, speak with a divorce attorney, such as Diane Dramko, Attorney At Law.
