Similar to marital assets, marital debts are split during a divorce. Certain types of marital debt however, are not as easily divided and present unexpected problems during a divorce. An experienced divorce attorney will be aware of and knowledgeable about these problems in advance even if you are not.
Credit card companies are not bound by the terms and conditions of a divorce decree or property distribution settlement. As a consequence, credit card debt incurred during the marriage is generally the responsibility of both parties after the divorce, even if one spouse was charged with paying a particular debt in a divorce settlement. Credit card companies can and in most circumstances will, go after both spouses for jointly incurred debt—especially if both spouses signed the agreement or are cosigners. In most situations, spouses are not liable for credit card debt if either spouse is only listed as an authorized user.
Community Property States
In community property states, marital debt is always considered joint debt, so spouses can be held responsible for debts incurred by the other spouse even if they did not sign the agreement with a creditor and was unaware of the debt. Keep in mind that debts incurred by spouses prior to marriage or after separation or divorce are not considered joint debts.
The Effect Of One Spouse Filing For Bankruptcy
If one spouse files for bankruptcy after divorce, his or her liability to the credit card companies will be discharged, which means the other spouse will be on the hook for paying the debt if both parties were jointly liable on a credit card.
Protecting Yourself From Future Liability Is Important
Ensuring that liability is cut off so future debts incurred by one spouse is not considered joint debts, even if they are incurred after a divorce is final is crucial. Some common solutions:
- If possible, leave the marriage without any joint debt or pay off debt before the divorce is finalized
- Close joint accounts
- Maintain detailed records of your own charges immediately after separation – any debt incurred after separation is the sole responsibility of the person who made the charges. Time of separation varies from state to state. In some states, you need to legally declare a separation. In other states, a legal separation is not required and separation is effective once you start living apart.
- Add an Indemnity Clause to your divorce settlement agreement – a properly worded indemnity clause can allow one spouse to take the other back to court and require the spouse responsible for the debt to pay back money that was paid towards the defaulted debt.
- Both parties file for bankruptcy at the same time so creditors cannot come after either spouse
Contact a Legal Professional
The laws regarding dividing marital debt during a divorce are very complex. A divorce attorney can advise you in all aspects of your divorce matters, including dividing marital debt and drafting a divorce settlement agreement that shields both spouses from future credit card liability.
If you would like more information regarding property division or the impact of bankruptcy following a divorce, contact the Law Offices of Andrew C. Ladd, LLC for help.
