Separating financial interests is a key component of any divorce. Spouses have to split up their bank accounts and divide their home equity. They likely also share financial obligations that they have to address.
They may have mortgages and car loans to refinance. In many cases, they may also have credit cards to consider. In some households, each spouse has their own lines of revolving credit. Other times, spouses have joint accounts that they share. In both scenarios, the balances accrued during the marriage are potentially part of the marital estate.
Spouses need to consider their circumstances carefully to properly address their credit cards when they divorce. The three issues below are among the most important to consider.
What debts are actually fair to divide?
Some people come into marriage with pre-existing credit card debt. It may be necessary to go over financial records to ensure that the spouses don’t split debts that already existed before the marriage. In some cases, the debts taken on during the marriage may constitute dissipation. One spouse may have accumulated debt to diminish the marital estate or while actively damaging the marital relationship. Credit card balances related to infidelity or gambling may not be subject to division in some cases.
How much can each spouse pay?
Addressing credit cards often involves an allocation of specific accounts to each spouse. People have to look honestly at their income and basic expenses to evaluate what they can pay and also what their spouse can pay. They may need to carefully consider the possibility that their spouse might overextend themselves in the future. If one spouse fails to make payments on debts from during the marriage or if they file for bankruptcy, then the other might face collection activity and credit consequences. Being realistic about what each spouse can pay and looking for ways to pay off the debt during the divorce can sometimes be better than continuing to make payments after the divorce.
What happens with the accounts during and after the divorce?
Sometimes, each spouse already has their own accounts. Other times, spouses may need to freeze or close shared accounts. They may then each need to apply for separate credit cards to handle their expenses during and immediately after the divorce. The spouses may need to plan how they address their credit cards carefully to avoid penalties and interest. They may also need to address rewards. Many credit cards allow people to accrue balances or to reimburse certain expenses. The value of those rewards can factor into the property division process in some cases.
Creating a thorough inventory of accounts and financial obligations is the first step toward addressing major property division matters. Spouses typically have to address their credit cards and numerous related concerns during divorce.