- Who pays credit card debt in divorce?
- Does state law dictate who pays?
- Divorce settlement negotiation of credit card debt
- FAQ
- Tips
When a divorcing couple works on their marital settlement agreement, one of the biggest sources of contention can be credit card debt. Who is responsible for paying the balance? What if one spouse incurred debt the other didn't know about? These are questions that often must be answered before a divorce decree can be finalized.
Who pays credit card debt in divorce?
Sometimes, the decision to use credit cards is a joint one: Married couples may use their credit cards to help pay for big items they need for their home. Other times, one spouse racks up debt without the other person’s knowledge. The person ultimately responsible for paying back credit card debt in divorce can vary.
- If it’s a joint credit card: If the credit card is jointly owned, both spouses would likely be responsible for the debt. Unless one spouse admits the debt is solely theirs, the credit card company will likely attempt to collect the debt from one or both spouses.
- If it’s just your card: If the credit card is in your name only, you're theoretically responsible for the debt. However, if you can prove your ex-spouse used the card, you may be able to get the credit card company to attempt to collect the debt from both of you.
- If it’s your ex-spouse’s card: If the credit card is in your ex-spouse's name, they are theoretically responsible for paying the debt. If they refuse to pay or cannot pay, however, the company might still go after you for what is owed.
Does state law impact who pays credit card debt in divorce?
State law can affect who ends up paying the final tab. Do you live in a community property state or an equitable distribution state? The answer to this question can affect how assets and debts (including credit card debt) are divided between the two of you in your marital settlement agreement.
Community property state residents
If you live in a community property state, you'd probably be on the hook for half the credit card debt – unless you could prove that your spouse opened a credit card and used it without your knowledge. Debt is generally divided 50/50 between each spouse in these states. This means that if one spouse incurs $10,000 in credit card debt, the other spouse would be responsible for $5,000 of that debt.
Equitable distribution state residents
If you live in an equitable distribution state and your former spouse has debt on a card in their name, you may be able to avoid paying that debt, as your marital debt would be divided equitably rather than 50/50. In equitable distribution states, the division of property, assets, and debts is done in a way that is fair but not always equal. This could mean that one spouse is responsible for a majority of the credit card debt while the other gets most of the assets. It’s a scenario that can leave one spouse feeling like they got a bad deal in the divorce, even if they were the one who incurred the credit card debt.
In community property states, debts are generally divided equally between spouses. In equitable distribution states, however, debt division occurs in an equitable manner. This can be confusing because “equitable division” does not mean a 50/50 split. It simply means that each spouse incurs an equitable share of the debt.
Credit card debt in the divorce settlement negotiation process
A few different scenarios could play out in the divorce settlement negotiation process. In some cases, the spouses agree on who will pay off the credit card account. In other cases, neither spouse accepts responsibility, so the credit card company must get involved and attempt to collect the debt from both spouses.
FAQ about credit card debt in divorce
Can our credit card debt be divided before we get our final divorce decree?
Yes. In divorce settlement negotiations, each spouse typically agrees to a specific division of property, assets, and debts. Credit card debt is included in that agreement. Typically, if one spouse is responsible for the credit card debt, they will also be responsible for any interest or penalties accrued on the debt.
Can we pay off our credit card debt by liquidating assets?
Yes. Divorcing couples sometimes decide to pay off credit card debt by liquidating marital assets. For example, if a couple has $10,000 in credit card debt and $30,000 in assets, they might agree to liquidate $10,000 worth of assets to pay off the shared debt. This type of agreement is often called a “clean break” because it allows both spouses to move on from the marriage with no outstanding obligations.
What if we can’t agree on a repayment plan?
If spouses can't agree on a repayment plan, the credit card company may get involved. The company may try to collect the debt from both spouses. Or, they may only go after one spouse. This is largely dependent on the state law and which theory of debt division that state follows. Unfortunately, collection attempts from the credit card company can be very stressful and add more conflict to an already difficult situation.
Recommended download: Property Division Spreadsheet
5 tips for preserving your credit as you go through a divorce
Credit card interest rates are notoriously high. As you move into this next chapter of your life, you don’t want joint credit card debt weighing you down. Although your financial situation might not be perfect, you can make the most of it by following these tips.
1. Get your credit report, and keep tabs on your credit score.
You can obtain your score through any of the three major credit bureaus: Experian, Equifax, or TransUnion. While this knowledge alone won’t provide debt relief, it can help you catch any errors and guide your future financial decisions.
2. Pay off as much debt as possible before the divorce agreement is finalized.
This may be achieved through a debt consolidation plan, monthly payments that exceed the minimum payment requirement, or other means. The goal is to eliminate shared debt as much as possible so you can get a clean break.
3. Don't make any big purchases or take on new debt during divorce.
The goal is to rid yourself of shared debt. If you need to improve your credit score, consider taking out a line of credit in your own name and making timely payments to boost your score.
4. Communicate with your ex about your financial situation.
If necessary, use a mediator to intercede between the two of you. Knowledge is power in this situation. mediator
5. Get help from a financial planner or credit counselor.
A session with a certified divorce financial advisor (CDFA) can be well worth the expense for the knowledge and tips you gain. At Hello Divorce, we offer flat-rate sessions with a CDFA to help divorcing couples at all stages of the divorce process plan their best financial course.
If you’re feeling overwhelmed by your divorce – including the shared debts you and your ex must now wade through – we see you. It can feel absolutely overwhelming, but we’re here to tell you that you can and will make it through this. If you’d like to talk to one of our experts, go here to schedule your free 15-minute call. We’re happy to help.
Frequently Asked Questions About Credit Card Debt in Divorce
Who pays credit card debt in a divorce?
It depends on your state and your circumstances. In community property states, most debts incurred during the marriage are shared equally. In equitable distribution states, judges divide debts fairly based on each spouse’s situation, which may not be a 50/50 split.
Is a card in one spouse’s name always their responsibility?
Not always. Even if only one spouse is the account holder, if the charges were for family or household expenses, courts may consider the balance a marital debt to be divided.
Are authorized users liable for the balance?
Authorized users usually aren’t responsible to the credit card company, but during divorce a court can still assign part of the debt to them and order repayment as part of the settlement.
What if my spouse ran up credit cards after we separated?
Debts incurred after separation or for non-marital purposes, such as spending on personal luxuries, may be assigned to the spouse who made those charges. Courts can treat reckless or wasteful spending differently than shared household expenses.
How do courts divide credit card debt?
Judges consider who used the cards, why the charges were made, each spouse’s income, and the overall asset and debt division. The goal is to achieve a fair allocation of responsibility.
How can I protect my credit during divorce?
Check your credit reports, monitor balances, freeze or lower limits on joint accounts, and close or separate joint cards when allowed. Stay on top of statements until all balances are paid or refinanced.
How to Handle Credit Card Debt in Divorce
List every account and balance
Write down all credit card accounts, noting who owns them, who is an authorized user, and the current balances.
Pull full credit reports
Review your reports from all major credit bureaus to ensure no accounts are missed or overlooked.
Categorize charges
Separate marital expenses, such as groceries or utilities, from non-marital or post-separation charges. This helps in negotiations or court.
Stabilize the accounts
Freeze joint cards if possible, remove authorized users, and set up autopay on accounts that remain active to avoid missed payments.
Choose a payoff and division strategy
Negotiate who will pay which accounts. You might close cards, pay balances with marital assets, or assign responsibility with reimbursement terms.
Document terms in the settlement or order
Make sure your divorce judgment clearly states who is responsible for each balance and how payments will be handled.
Monitor and follow through
Check statements and credit reports regularly until all balances are paid and accounts are closed or transferred.
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