How To Handle Credit Card Debt During A Divorce

Credit Card Debt During a Divorce
According to a report by the American Psychological Association (APA), around 40% to 50% of marriages in our country end in divorce.

In most cases, divorce is an emotionally difficult event. But I would say that it’s a way better option than staying in an unhappy marriage. So, you can plan for a healthy divorce to maintain respect for each other and make the process as smooth as possible. If you are planning for a divorce, you might be worried about how to handle your credit card debt during this time.

Well, you don’t need to worry anymore. Here we will be discussing how credit card debt is handled in a divorce.

Who is legally responsible for the credit card debt?

Most of the states in our country follow the common law rules to determine the liability of debt in marriage. In the common law states like Alabama, Colorado, Georgia, etc., you are liable for a credit card debt that is in your name. If your spouse owns a credit account, only he/she is liable to pay it off. But if you are the cosigner of the credit card, both of you will be liable for paying off the debt.

So, if you live in one of the common law states, find out whether the credit card debt is in your name or your spouse’s name or belongs to both of you.

However, if you live in one of the community property states, you might be liable for a credit card debt that is not in your name or you haven’t cosigned for. In our country, some states follow community property laws, like:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

If you live in any one of these states, debts won’t be divided based on which spouse has incurred them. If you or your spouse has taken out a credit card, both of you will be responsible for paying it off. But problems may arise if a spouse stops making payments for a debt that is not in his/her name.

Let’s say, you live in a community property state. And both you and your ex-spouse are responsible for paying off a credit card debt which is originally in your name. By any chance, if your ex-spouse fails to make payments, you will be held responsible for it. Because the original credit card agreement has your name and usually, credit card companies value it more than the divorce decree.

However, you may take legal action against your ex-spouse for not abiding by the court order. But in the meantime, your credit score might be badly affected due to the nonpayment of your credit card debt.

How to Stay Away From Credit Card Debt During a Divorce

If you have joint credit card debts, it’s always better to get rid of debt before the process of divorce starts. The worst part of a credit card debt is the high-interest rate. And when you are managing multiple credit card debts, the situation becomes worse.

So, you can opt for the balance transfer method to transfer the outstanding balance amounts of your existing credit cards to a new card preferably with a much lower interest rate. It will help you to pay off multiple credit card debts through single monthly payments and save money on interest payments too. However, you need to have a decent credit score to be eligible for taking out a balance transfer card at a preferable interest rate.

But what if you or your spouse don’t have an adequate credit score to take out a balance transfer card?

Well, in that case, you can get rid of your credit card debts by setting up a debt management plan (DMP). For that, you will have to approach a genuine credit counseling agency. The expert counselors of the agency will negotiate with your creditors on your behalf to set up repayment plans. Besides, they will try to reduce the interest rates and waive off any late fees. Once your creditors agree, you can start single monthly payments to the counseling agency. And they will distribute the amount among your creditors.

So, opting for a DMP will help you to pay off your credit card debt sooner as a larger part of your payments will go towards the principal amount.

Remember, once you pay down your joint credit card debts, I would advise you to close those accounts. This way, you and your spouse can refrain from incurring new outstanding debts in your joint credit cards.

So, the bottom line is, you need to manage credit card debt properly during the divorce. The best possible solution would be working together to eliminate credit card debts from your lives before filing a divorce. It will help you to prepare for a hassle-free divorce.

However, in a divorce proceeding, the judge might assign you the liability of a credit card debt that you were not otherwise liable for. In that case, please make sure to repay the debt on time. Otherwise, your ex-spouse can sue for violating the divorce decree.

Lastly, be patient with your ex and be kind to yourself and stay happy always.

Guest Author Bio: Andy Masaki is a blogger and financial writer associated with the Oak View Law Group. He is a debt expert and a member of several online forums, where he shares his advice as well as tips to lead a financially independent life. 

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