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Handling credit card debt in a divorce

Spouses ending their marriage in Texas must make many decisions on property division. However, a spouse may keep a remnant of their marriage even after the divorce is complete in the form of their ex-spouse's debt if certain precautions are not taken.

Credit card holders enter contracts with the issuer agreeing to pay off charges. However, a spouse may incur debt which is held jointly by the couple, and their spouse may be held liable if the debt is not paid off. Spouses undergoing divorce can also agree on which spouse pays off credit card debt.

Credit card companies, however, are not governed by divorce agreements. In community property states such as Texas, both spouses are jointly liable for debt acquired during their marriage regardless of which person is responsible for a purchase.

Like other divorce issues, there are definite dos and don'ts. First, spouses should not pile up debt regardless of the strength of their marriage.

The spouse responsible for debt is usually the one whose name is on the credit agreement. They should consider keeping separate cards to clearly indicate which spouse owes a specific debt.

Joint accounts that are not being used should be cancelled so no more debt may be accumulated on those cards. If one spouse is an authorized to use their other spouse's credit, that authorization should be terminated.

It is also important to keep good records if a spouse continues to use credit cards after separating from their spouse. These should describe specific spending and purchases. This can support ownership claims later and which spouse is responsible for the debt.

Spouses should also consider paying off any debt after they divorce, perhaps by using savings or the home equity proceeds from the sale of the house. For spouses who are facing financial difficulties, an accredited counseling agency may assist.

If a spouse undergoes bankruptcy, their former spouse may be responsible for any debt that was jointly held by both spouses. Both parties can file for bankruptcy protection to avoid this.

Ignoring debt shared with a former spouse is extremely risky. This debt can end up on credit histories and can harm both spouses' credit scores. An attorney can assist a spouse on this financial issue and seek a resolution that protects a spouse.

 

Source: The Motley Fool, "Just got divorced? Here's what happened to your credit card debt," Selena Maranjian, Nov. 2, 2017

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