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Am I responsible for my spouse’s credit card debt?

This article is written by Hakyn Morrissey.

I wasn’t the one who collected sports memorabilia, stocked the wine cellar or felt compelled to upgrade my devices every few months. Am I going to be saddled with all the credit card debt that financed those indulgences (and then some) now that we’re getting divorced?

When it comes to divorce, it’s normal to have plenty of questions. After years of sharing everything, understanding how assets—big or small—will be split up during divorce proceedings is key. An area that is frequently contested is credit card debt. Many couples use the same credit card when purchasing goods for the family but also for themselves. This creates questions of tension around who bought what, who owes what, and who has amassed more debt. It is a daunting issue to face but you can take steps to make the process go more smoothly.

My clients share scenarios like this all the time. So boiling it all down, the question is, when is a spouse responsible for credit card debt?

Where to start with credit card debt during divorce?

 I’ll get to the specifics in just a bit. As with so many questions about the financial aspects of divorce, there is no simple answer. It’s important to take a step back and examine the issue of debt and other money matters in the context of your total financial picture.

My job is to evaluate that picture and assess every element in it including credit card debt. I work with clients to visualize and create the best picture based on their plans and goals for the future. This step may involve getting access to financial information they haven’t considered before. Often, one spouse has more understanding of a couple’s financial information, either because they have more knowledge through their work or simply have more interest in it.

Taking the time to understand your current financial situation and what you envision going forward can be helpful before you go into your divorce mediation or court proceeding. The time it takes can also help to put you in a stronger position resulting in a better outcome.

Who owns what in divorce?

I never start off with “yours, mine, ours” when discussing divorce and debt responsibility. Instead, I recommend getting all debt obligations down on paper with two key considerations in mind. First, working to get an equal share, plus life events, and choices made together that impacted professional advancement and earning potential, such as the decision to stop or scale back work to raise children. Second, devising the best strategy to make that plan a reality.

Establishing a full and smart financial strategy goes beyond searching “debt settlement divorce.” It takes a team of dedicated professionals and supportive friends and family. Your professional team should include a certified financial planner and a divorce attorney. In many instances, I recommend that a tax attorney help to navigate complex issues. Negotiating credit card debt quickly gets complicated because of the high interest rates involved, so you need a team that knows the right questions to ask and steps to take to ensure you’re protected.

First steps in debt settlement during divorce

If possible, start by settling on who is responsible for which purchases and, if you can, pay off any debt before the assets are divided. Pay off the debt on any cards you and your spouse have shared. Once the debt is paid, cancel all cards shared with your spouse and establish cards in your name only.

In most cases paying the debt off in full isn’t an option. For debt you can’t pay off, a number of factors determine how it’s split. Generally, courts will divide assets and liabilities equally to separate shared debt in the following ways:

  • Split 50/50
  • One party is responsible for more of the debt if there is documentation/proof demonstrating a 50/50 split is not equitable
  • One party is responsible for more of the debt because of the division of assets and/or alimony

No matter the process, keep it simple when it comes to addressing debt. Keep track of finances to plan for the future, re-title, and work with legal counsel so they can guide you through the process.

Can you use credit card debt as a bargaining chip during divorce?

Like I said earlier “how is credit card debt split in divorce?” is best framed within the bigger financial picture. For example if you have ample cash that isn’t needed for living expenses, through investments or accounts established in your name before marriage, you might agree to pay off the entire credit card debt regardless of who bought what. In paying for the debt, you might retain possession of assets with longer-term appreciation potential, such as your home. Just remember to consider the tax implications and advantages/disadvantages of keeping certain debts. If you decide to keep the mortgage instead of credit card debt, you receive a tax deduction on the interest payments but these could be offset by the costs to maintain a home.

Using credit card debt as a bargaining position becomes more effective with a spouse who has, or will have, an immediate need for cash once the marriage ends. Your professional team should also consider the implications of living in a common property state, where assets acquired during a marriage are split 50/50.

What if there is a dispute with credit card debt during divorce?

Always approach disputes prepared with the information necessary to make/support your case. Know your negotiables and non-negotiables and your anticipated current and future financial needs. This is where your trusted team of attorneys and financial advisors can step in to help making the argument for your future financial needs.

Here are some FAQs I’m often asked around splitting credit card debt during divorce:

How can we separate shared debt during divorce?

There are many factors that go into determining how the assets and liabilities are split, but usually the courts will divide assets and liabilities 50/50.

What happens to individual debt during divorce?

In a common property state, individual debt accumulated during a marriage can be seen as joint liability similar to assets. However, multiple factors go into determining how assets and liabilities are split that will be determined during the legal process of divorce.

What happens with debt you already had when you got married?

Usually debt that you had when you entered the marriage would be seen as yours. However, you should consider what you brought to the marriage. Ask yourself, who did the debt benefit and is it equitable?

How does interest rate factor into negotiating credit card debt?

It’s important to review income, expenses, assets, and liabilities when it comes to debt. Evaluating the interest rate on your credit card and how long it will take to you pay it off is an important consideration.

Are there any other debts you could negotiate to pay instead of credit card debt?

You want to consider the tax implications and advantages or disadvantages of keeping certain debts such as, mortgages vs. credit card debt. Though mortgages may provide tax advantages and give you deductions, they may be offset by the cost of maintaining a home, the mortgage payments, or property tax.

How do you handle disputes that come up during this process?

Prepare for disputes by knowing 1) all relevant information, 2) your negotiables and non-negotiables and 3) your current and future financial needs. Doing so will help put you in the strongest position for negotiation.