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Are you getting a divorce soon? If so, you'll have to sort out many things to make it final, including credit card debt you might share as a couple. When you have credit card debt in both of your names, you are equally liable for the outstanding balance, even following the divorce.
The same rule applies to accounts you cosign, and you'll owe the debt if your partner doesn't pay up. You could also be held equally responsible for your ex-spouse's debt, even if you're not a joint owner or cosigner, depending on which state you live in.
Read on to learn more about how credit card debt is handled in a divorce, how your credit score could be impacted and what you can do to protect your credit health.
Who Is Liable for Credit Card Debt in a Divorce?
When you get a divorce, you are still responsible for any debt in your name. That means that if you and your spouse had a joint credit card, you are just as liable for that debt as your spouse. Beyond that, however, the details of how credit card debt from your marriage is handled in divorce can depend on several factors, including where you live.
States handle debt from a marriage in one of two ways: It's either considered "community property" or "common law" property. Generally speaking, states that follow common law property rules hold the spouse who incurred the debts responsible for its repayment. On the other hand, states that follow community property rules hold both spouses responsible for debts incurred during the marriage.
Most states follow common law, which means that a court will hold you responsible for:
- Credit card debt that is solely in your name
- Joint credit card debt that is both in your name and your spouse's
- Credit card debt from an account that you cosigned for your spouse, even if it's not owned jointly
Currently, there are 41 common-law property states. If you live in Alaska, you can elect to have your assets treated as community property.
The other nine states—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin—do things differently. These states follow community property rules, which means you and your spouse will be held equally liable for:
- Any credit card debts in your name (as a sole owner or jointly)
- Credit card debt you cosign for, even if it's not owned jointly
- Any credit card debt belonging to your spouse that was incurred during the marriage, even if your name is not on the account or you're not a cosigner
Sometimes, there are exceptions to the rules. During divorce proceedings, the judge has the right to assign a credit card debt to you, even if you aren't technically liable for it. For example, you could be on the hook for a credit card debt that's only in your spouse's name, depending on what it was used for. The same rule goes for your spouse—they could be held responsible for a debt that's solely in your name if the judge assigns the debt to them in a divorce decree, which is legally binding.
This can get complicated, however. A divorce decree won't change the contract on the debt, which means the original account holder will retain their responsibility as far as the creditor is concerned. If your spouse refuses to pay the assigned debt, the credit card issuer may come after you. The creditor has a right to continue their collection efforts since the original agreement was between you and the credit card issuer. A divorce decree does empower an ex-spouse to sue their former partner if they don't handle a debt assigned to them, though.
Also, know that if you have a joint credit card, you can't just remove yourself from the account. You'll either need to pay off the balance or continue to make minimum payments until the card is paid off before you can close the account.
How Will the Divorce Impact My Credit Score?
Your marital status won't appear on credit reports, so it won't affect your credit scores. Joint accounts with your ex-spouse will have an impact, though, and could affect their credit score and yours for better or worse depending on how the account is managed. Accounts that you cosigned for your spouse or that listed you as an authorized user will also appear on your report as long as they remain open. This means if they make payments late, skip them altogether or run up the balance, your credit will be affected.
It's important to remember that divorce doesn't absolve you of your responsibility for accounts with your name on it, despite what your divorce decree may say. Even if your divorce decree assigns your former spouse responsibility for certain accounts in your name (or in the name of both partners), any missed payments or default on an account with your name on it will still be reflected on your credit reports.
Account payment history is an important factor in your credit scores, and late payments on accounts as a result of divorce can drag your scores down. That's why it's important to make sure you fully understand your debt obligations throughout the divorce process. If your former spouse is responsible for paying an account with your name on it, communicate with them to make sure the account is being managed responsibly.
Am I Responsible for Other Forms of Debt in a Divorce?
Credit cards aren't the only forms of debt you have to worry about in a divorce. You could also be responsible for other debts, including car loans, student loans, personal loans, mortgages and business debts.
The same rules explained above also apply to other debts, including how debts are handled with regard to common law or community property rules. If you have questions about the specific types of debt involved with your divorce, talking to your creditor and divorce lawyer can help you clear things up.
Unfortunately, it's not uncommon for divorce to be accompanied by bankruptcy. If this is the case with your situation, it may be simpler to delay bankruptcy until your divorce is settled. There could also be a case to be made for filing bankruptcy before your divorce if many of the debts in question are held jointly. Be sure to review your finances, and consult with an expert if necessary, before deciding what's best for you.
How to Protect Your Credit During a Divorce
Divorces are never fun, and handling debt after you part ways with your ex-spouse can be challenging. If possible, work with them to pay off and close existing joint accounts or inquire with the creditor about converting the account to an individual account to protect your credit during a divorce.
Also, check with creditors to confirm that your spouse is not listed as an authorized user on your accounts—if so, have them removed immediately to prevent unauthorized charges. If credit card debts were assigned to your ex-spouse through a divorce decree and they are not cooperating, try to make timely payments for at least the minimum amount due to avoid damage to your credit score.
Stay on Top of Your Credit in a Divorce
You can also keep tabs on your credit report with credit monitoring from Experian. It's free, and you'll get real-time alerts any time your credit report is updated. You'll also have access to an interactive FICO® Score☉ tracker to help you stay on top of your credit score and track changes over time.