During a divorce, debts owed jointly by the couple must be divided between them in the same way that property and assets are divided. Each spouse must ensure that responsibility for each debt is assigned. 

They should also takes steps to make sure that each spouse is protected from any additional or personal debt incurred by the other or from the other spouses failure to pay off their share of the debt. This will help protect each individual’s credit score upon divorce, as well as the ability to obtain future loans.

In many divorce cases, each spouse will be assigned the debt to specific credit cards so that cumulative debt is shared evenly. However, the parties can also agree to split the debt in an uneven way. They can also be ordered to do so by a judge based on financial circumstances. To ensure that all debts are properly identified and assigned, it may be helpful to obtain a credit report which will list all debts.  

How Do Community Property Laws Affect Credit Card Debt in Divorce?

The specific way that a divorce court will handle and divide debts during the divorce proceedings may depend on the state where you live. If the state that you live in follows community property laws, any debts that you or the other spouse incurred after marriage but before separation or divorce is called “community property” or “community debt”. This means that both spouses will be equally liable on the debt. 

However, in such states, debts that are acquired before the marriage or after the divorce or separation are not considered community debts. These will then be assigned separately to each individual spouse who acquired the debt. 

Note: For reference, nine states are classified as community property states. These are: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. The remaining states may follow varying types of marital property rules.

For non-community property states, the debt may be divided according to a number of “equitable distribution” principles and factors. The court or the judge may consider various factors in assigning the debt, including:

  • How long the marriage lasted;
  • The financial background of each party;
  • Whether a specific agreement exists between the parties regarding distribution of debts; and
  • Various other factors. 

No matter what type of state you live in, the division of credit card debt in a divorce will likely be less than straightforward. The judge may sometimes order you to pay a portion of the debt, even if you are not technically liable for the debt. For instance, this can happen if the debt was acquired to pay for improvements on a shared home or car.

How Can I Protect Myself from Future Liability?

In a divorce setting, it is important to make sure that liability is cut off so that future debts incurred by one spouse are not considered joint debts. This is especially true for debts that are incurred after the divorce.

For example, if a joint credit account remains open with both names on it, any additional charges on it might be considered joint debt by the credit company. This can lead to confusion if the credit company with regard to which spouse to pursue for payment. 

Also, if there are any delinquent payments issues, then the referral to a collection agency might appear on the credit report of both spouses. It is important, therefore, that all joint accounts be closed as soon as divorce is pending, or that the spouse not still using the account have their name removed.  

To protect each spouse further, the divorce judgment should include a deadline for the payment of any joint debts by each party. This can include the transfer of the debt to an individual credit card account, since the other spouse will no longer be liable. The judgment should also include additional clauses. This can include requiring the spouse responsible for a debt to repay any losses suffered as a result of the failure to pay off the debt, such as defending against a collection agency.

Finally, there is also language which can be included in a divorce judgment which can help protect a spouse. For instance, there can be clauses which protect them from being left without recourse if the other spouse declares bankruptcy before paying off the credit card debts.

Do I Need a Lawyer for Help with Credit Card Debt in a Divorce?

The laws regarding dividing debt during a divorce are very complex, and will vary from state to state. An experienced divorce lawyer in your area can advise you in dividing your debt and in drafting a divorce agreement that protects both spouses from future financial liability. A lawyer can also represent you in court if needed, and can help you pursue additional legal remedies if needed.