Divorcing spouses are entitled to divide credit card debt between them however they jointly see fit. Where they can’t agree, a court will engage in the same inquiry it does for any other type of debt. First, it will identify what credit card debt is marital debt and what credit card debt is separate debt. Once identified, the court will determine the value of the marital credit card debt. Finally, the court will decide how to divide responsibility for the debt between the couple, in the way it deems to be most equitable (fair). As always, separate debt stays with the person who incurred it.
If you have a concern around high credit card debt tied to one spouse’s spending, it’s an issue that you should raise at the outset with your attorney.
There are a couple of idiosyncrasies to dividing credit card debt that are useful to be aware of when going through the divorce process.
First is the issue of what kind of spending qualifies as marital. Let’s say that you and your spouse had a joint credit card account, or one of you had an account on which the other was authorized to use the card. The two of you have always had very different spending habits. Where you’re a minimalist and never shop, your spouse loves to shop and racks up consistently high credit card bills throughout the marriage. Most of the expense purchases on the card are gadgets/clothing/luxury items for the spending spouse. Is the debt that results from that kind of spending marital or separate?
It may seem obvious to you that your spouse’s luxury spending is not marital, but it’s not so clear. Where you have an established pattern of spending during the marriage, even if one spouse never engaged in it and it was clearly beyond your means, the resulting credit card debt will often be considered marital. In extreme cases, e.g., where one person engaged in a spiteful spending spree at the end of the marriage, or where someone spent a lot of money on clearly non-marital items like an affair or an addiction (gambling, drugs, prostitution, etc.), you have a stronger argument that the spending was not marital, and the result debt shouldn’t be. There are no guarantees, though. If you have a concern around high credit card debt tied to one spouse’s spending, it’s an issue that you should raise at the outset with your attorney. You’ll also want to get your attorney’s guidance on how best to protect your credit, in light of your circumstances, about which more below.
The second issue to keep in mind re credit card debt is that whose name is on a particular credit card account is insignificant in some ways and yet very significant in others. As with holding title to property, the fact that one spouse’s name is on a credit card account does not mean that the debts incurred on that account are separate debts of that spouse. If incurred during the marriage for marital purposes, a credit card debt will be deemed marital even if it’s only in the name of one spouse.
However, a divorce process cannot legally alter the nature of your relationship with your credit card company. This means that if you are the individual whose name is on the credit card account, in the eyes of your creditor (the credit card company), you alone are the responsible party (the debtor). Even if a court ultimately says that your spouse is responsible for a portion of your outstanding debt on that card, if a credit card balance goes unpaid, the credit card company will seek a remedy from the named spouse. And only the named spouse will have a consequence on their credit report if the credit card debt is unpaid.
In practice, in negotiating a divorce settlement, if you are the sole named debtor on credit card accounts and you’re relying on your spouse to pay some or all of the debt, you want to give careful thought to what would happen if your spouse didn’t pay his or her share. It can help mitigate risk to you to have the full debt paid off, or the money to do so set aside in escrow, by the time you sign your settlement agreement.