How is Credit Card Debt Split in Divorce?

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Divorce can have a major impact on your financial life—especially if you have credit card debt. There are many nuances to how debt is handled during a divorce, so it’s important to understand who’s liable before your divorce is final.

Below, we’ll give you an in-depth look at what you are responsible for now and how to keep yourself safe from your ex-spouse’s future spending. Handling credit card debt during a divorce can be complicated from a legal standpoint. While we aim to give you a high level of understanding of what you can expect, this information is not a substitute for legal advice. The best thing you can do is to consult your lawyer about your specific circumstances.

Who Gets Saddled With Credit Card Debt After a Divorce?

The person responsible for joint credit card debt varies by state. Most states follow what’s referred to as “common law,” meaning you can be held liable for all debts taken out in your name or that are attached to your name. So, if you have a credit card under your name and your partner was an authorized user of that card, you can be held liable for his or her purchases.

This is the case even if your ex-spouse files for bankruptcy and he or she agreed to (or was ordered to) pay down the debt. In such a case, you will be responsible for the debt in the eyes of the financial institution, even though the court may have sided with you. You can sue your ex-spouse if you suffer financial damages because of the debt, but that is your decision; credit card companies are not required to follow the terms of your divorce decree.

Common law isn’t the case everywhere. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin follow a set of rules called “community law.” In those states all property and debts accrued during marriage are to be split between spouses after the divorce. This includes all credit card debt—even debt on accounts that don’t have your name on them.

However, there is some relief for people in community law states. Debt accrued before the marriage is generally excluded from community debt. In most cases, you won’t be liable for debts from purchases that only benefited your spouse or that were acquired from gambling or drugs. These are all things you should discuss with your lawyer during the divorce process.

In Alaska, couples can choose to abide by community law or common law during their divorce negotiations, as long as both come to a mutual agreement. Note that this choice also applies to splitting property and other divorce technicalities, so choose wisely.

With this in mind, it’s best to work with your lawyer to solidify debt payment terms before your divorce is final.

What Should I Do To Protect My Finances During The Divorce?

Try to pay down as much of your joint debt as possible before your lawyer starts drafting the divorce agreements. This will make splitting finances, debt, and other property easier down the line, giving you a head start on managing your finances as a newly single person.

Additionally, call your bank if you can’t make credit card payments during this time. While you and your partner will still be liable for the charges, the bank may be willing to work with you to change payment due dates. During this time, however, it’s best practice to stop using joint cards and make future purchases using personal funds.

After the divorce is final, secure your finances. Change your personal bank account passwords, remove your ex-spouse as an authorized user on personal credit cards, and change personal account numbers. This gives you piece of mind that your ex-spouse cannot access your finances or ruin your credit in case of a contentious parting of ways.

How to Get Your Name off a Joint or Co-Signed Credit Card Account

Ask your card card issuer to remove your name from any joint or co-signed credit card accounts before your divorce. As long as your name is on a joint account, you may be liable for charges if your partner stops paying his or her bills. Still, having your name removed from a joint account isn’t as easy as it seems. That’s because the bank may decide that your ex-spouse’s income is not sufficient to make payments. If that is the case but your ex-spouse agrees to make payments, you should monitor the account to ensure that these payments are being made. One way to do this is to ask your ex-spouse to retain the password to the credit card’s online account. This may be a hard conversation to have, but it’s the best way to protect your credit and finances because you’ll be required to pay the debt yourself if your ex-spouse stops paying the bill.

Joint accounts are different. Unlike a co-signed credit card, both joint account holders are expected to make payments. You and your spouse should work with your lawyer to discuss the best options for paying down the debt over time.

Splitting Cash Back, Miles, and Points in a Divorce

Splitting up cash back, credit card points, and airline miles can be tricky during a divorce. The fine print of most credit card and airline rewards programs say points can’t be cashed out. And because credit- card rewards aren’t seen as currency in the eyes of the law, they’re often glanced over by judges and lawyers during divorce negotiations. In most cases, couples end up splitting their stash of airline miles, but doing this is harder than you’d think.

Most credit card and airline rewards can’t be transferred to another account. Instead work with your ex-spouse to set up an agreement whereby each party will continue to share the rewards account but only use half of the existing points for themselves. If this can’t be agreed upon, you may decide to only use the points to fly your children home from college for the holidays or to visit grandparents.

Joe Resendiz

Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.

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