Your credit cards and divorce

Credit cards are an important financial tool to think about before you begin your divorce. They are a convenient source of financing for emergency expenses and there will be emergency expenses as the process goes along. The reason you need to carefully review your cards before your divorce is due to the nature of the financial liability they pose.

Credit cards are typically issued in three varieties. Some are likely solely in your name, meaning only you are authorized to use the card and that you are solely responsible for paying the debt incurred. If you have cards in your name, you will likely want to keep one of these cards.

With other cards, you may be the account holder, but your spouse may be an authorized user. These cards are risky with a divorce, as your spouse could charge a large expense, but you are contractually obligated to pay the bill. You should have your spouse removed from these cards before you file your divorce.

Last, there are jointly held cards, where both you and your spouse are legally responsible for all charges acclimated on the card. You should close these accounts when you file your divorce to ensure your spouse does not engage in “spite” spending.

It is also important to keep in mind that any outstanding debts on these cards, no matter the type, should be considered as part of your marital property and paid for with marital assets. While you can allocate this debt within your property division equitably, the parties who are contractually obligated under the terms of the credit agreement can be required by the credit card company to pay the debt.

This is why it is better to pay off these debts early in the process, as it eliminates the prospect of a long-forgotten debt coming back to haunt your finances because your ex-spouse has filed for bankruptcy and is no longer making payments years after your divorce.

Source: divorcemag.com, “Things to Consider Regarding Your Credit Cards During a Divorce,” Rosemary Frank, June 11, 2016