Understanding credit card liability during divorce
Understanding credit card liability during divorce
posted: Aug. 01, 2020
Divorce isn’t just an emotional separation but a financial one as well. During the process, couples must figure out how to divide assets like the family home, retirement accounts and other items of value. However, some spouses may also have to divide shared liabilities, like credit card debt.
Holding the spending spouse accountable isn’t easy
In divorce decrees, courts typically establish a couple’s rights and responsibilities upon marital dissolution. These orders can state that the spouse who spent the money must make the payments they charged on that card. Unfortunately, credit card companies don’t always cooperate in these matters. In instances where one spouse incurred debt in the other’s name, creditors may not be willing to transfer the debt to the responsible party.
Divide account assets before closing: For spouses who have shared credit card accounts, figuring out what belongs to whom is essential, as it can reduce any misunderstanding in the future. If spouses can’t seem to agree on the matter, an attorney can help them figure out what purchases are marital or separate.
Pay off remaining balances: If one spouse is worried the other will rack up credit card debt, it may be best to pay off the card in full before closing the account. That way, they can ensure they won’t incur any new debt from their spouse. This can help protect their credit score and other aspects of their financial future.
Establish other forms of credit: If they haven’t done so already, spouses may want to take out a credit card in their own name. Not only can they block their spouse’s access to the card, it can also provide them a credit score safety net.
Financial separation can be just as hard
Divorce is never easy, especially when money comes into play. But when spouses acknowledge potential challenges and take action, they can reduce the stress of the process and keep their finances intact.
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