People who are aren't divorcing can get into a lot of trouble when it comes to credit card use, but for a divorcing couple the issue can be magnified. When you part ways with your spouse, the debt has to go somewhere and how to handle credit card debt can turn into a huge divorce issue. Read on to find out how divorce law treats credit card debt and how you can avoid problems with it.
Where You Live Matters
The way divorce happens depends on where you live. Some states (only 10) take a community property approach, where debt and property are viewed as belonging to the couple together. More states take an equitable distribution approach where the debt is divided according to who owns it.
Community Property and Debt
Most people have heard of community property because of celebrities in California getting divorced and having to either bear the burden of their spouse's debts or benefiting from their spouse's property holdings. When it comes time to divorce, the debt load is often simply split down the middle. If your spouse loved to use their cards and ran up a large balance, you are now, unfortunately, 50% responsible for that debt. That fact is true even if your name is nowhere on the account and you didn't even use the card or benefit from it.
Equitable Distribution Property and Debt
Most states use this more equitable approach and the name on the account does matter here. As you might have guessed, the person who took out the card and whose name is on the account is 100% responsible for paying the debt. The divorce decree will contain a provision that may name the debt and assign the responsible party or just say that each party must pay their own debts.
In most cases, there is no such thing as a joint credit card account anymore. What may happen, however, is that a spouse may have a card in their name and is able to use their spouse's account to charge things. Unfortunately, this type of debt can call for a tricky divorce issue known as commingling.
Commingling can occur in not only credit cards but when there are co-signers and when a bank account has funds added or removed that previously belonged to the other party. Needless to say, commingling means trouble unless you and your spouse can work it out outside of court. In some cases, a forensic accountant must be brought in to go over the accounts with a fine-tooth comb and determine who owns what debt or asset.
Speak to your divorce attorney to learn more.