What Happens To Credit Card Debts After A Divorce?

Credit cards are a practical tool when it comes to managing your finances and spreading the cost of large payments. Yet, credit card debts are a frequent occurrence in the United States. Indeed, with a whopping 532 million credit card accounts in the U.S., it is easy to see how debt can build up. The average credit card holder has over $5,900 in debt. Unfortunately, credit card debt totals an alarming $860 billion in America. 

Credit card debts are not necessarily high compared to other types of debt, such as a loan. But, the reason why they become unmanageable is money shortage. Americans rely on their credit cards to make payments they couldn’t afford otherwise. When living expenses become too high, it can be impossible to make payments towards the debt. As a result, credit card debts tend to grow over time, making them unmanageable when a couple chooses to get divorced. 

Can you or your spouse pass their debt to the other party during a divorce? We help you understand how things work. 

The community property 

Nine states recognize the community property, which means that assets acquired during the marriage belong to both spouses. Unfortunately, the community property also affects what you owe, which means that with the help of experts such as Hutson Law, the debt can be shared. It will also affect credit card debts. In the event of a divorce, credit card debt related to assets that were purchased as part of the marital property, will be shared fairly between spouses. It’s important to understand that an equal split does not necessarily mean 50-50. Individual incomes will be considered before making a decision. 

The debt happened BEFORE the marriage

Whether you live in one of the states with marital property or not, assets and costs that occurred before the marriage will not be part of the community property jurisdiction. For example, a credit card account that was opened before the marriage may not be part of the fair split. In some cases, advisors may recommend splitting the costs of the credit card debt incurred during the marriage while ensuring existing costs remain with the original credit card owner. 

A spouse is a cosigner on a credit card account

A spouse may cosign a credit card account when their partner doesn’t meet the requirements to own a credit card under their name. This could be the case if your credit score is too low, for example. There are ways to build up your credit score, including repaying credit card debts during the marriage. Even if the cosigner is the person making payments towards the debt, it will positively affect both credit scores. It can also be beneficial for the cosigner as having multiple credit cards can help build credit score. It is worth checking the credit score of both parties before taking steps toward divorce. Indeed, regular payments could have improved the partner’s credit score, allowing them to own a credit card without a cosigner. If this is the case, it is a good idea to remove yourself from the cosigned account and cancel your responsibility for the credit card debt. If your name is still part of the cosigned agreement, you will be responsible for the repayment of the debt even after getting divorced.  

Credit card debts are complicated, especially when you and your partner accrue debts during the marriage. Depending on your location and the type of credit card accounts, both parties could be required to pay off debts equally.