Spouses typically share almost everything with one another. They sleep in the same beds and eat the same meals. They combine their retirement savings and their checking accounts. They also frequently share their debts. They may open joint credit cards to cover household expenses and optimize financial flexibility.
It is somewhat common for people to carry balances on their credit cards. If there is a divorce on the horizon and a large balance due on marital credit cards, spouses have to address those financial obligations in addition to splitting up their assets.
How can spouses address credit card debt during a divorce?
Determining what debts are marital
Generally speaking, the date when someone takes on debt determines whether it is marital or separate. Accounts held in the name of one spouse could still be subject to division. However, the intention when taking on the debt can also be an important consideration.
Debts related to extramarital affairs or the intentional dissipation of marital property may not be part of the marital estate. Spouses may need help reviewing financial records and determining what they have to divide responsibility for during the divorce.
Creating plans that don’t lead to unnecessary risk
Many people are eager to wash their hands of marital debts. Asking a spouse to take responsibility for most marital debt can relieve temporary financial pressure during and after a divorce.
Unfortunately, there is always the possibility of a default occurring. The spouse who accepts responsibility for the credit card balances in the divorce may stop sending in payments. They might also file for bankruptcy, at which point the other spouse might face aggressive collection activity.
Some people prefer to take responsibility for marital debts and then ask for a larger portion of the marital estate. Others might try to negotiate arrangements where the spouses use marital assets to cover marital debt so that neither spouse has lingering financial obligations from during the marriage.
If spouses can’t reach their own arrangements, then a judge may need to allocate responsibility for shared debts along with the assets included in the marital estate. Understanding how to approach property division negotiations can help people protect themselves financially during divorce. Credit card balances and other debts can be as important to carefully consider as high-value assets.
