Credit Cards and Divorce

Are you getting a divorce soon? If so, you’ll have to sort out many things to make it final, including credit card debt you might share as a couple. When you have credit card debt in both of your names, from the credit card company’s perspective you are equally liable for the outstanding balance, even following the divorce. The same rule applies to accounts you cosign, and you’ll owe the debt if your spouse doesn’t pay the balance due. You could also be held equally responsible for your ex-spouse’s debt, even if you’re not a joint owner or cosigner.

Who Is Liable for Credit Card Debt in a Divorce? 

When you get a divorce, you are still responsible for any debt in your name. That means that if you and your spouse had a joint credit card, you are just as liable for that debt as your spouse. 

Credit Card Debt in Your Name Only

All debt is indeed marital debt until you are divorced. However, that doesn’t mean that the credit card debt you incur in your own name will be divided in the same as credit card debt in joint names. This is important to consider when separated. Instead of assuming the court will simply lump your individual credit card debt into the overall division at divorce, assume that you could be held responsible for all credit card debt incurred only in your name in a divorce. The court will look at your purchases – especially after separation – to determine whether a purchase was for the family or just for you. If a purchase was just for you then the court will need to consider whether it was a necessity or a luxury purchase.

Credit Card Debt in Joint Names

In a Missouri divorce, both parties will likely be responsible for credit card debt on a card held jointly. This usually applies even if one spouse was the one who used it the most or made the payments. The court will still look at specific purchases and look at whether those purchases were made for the family. Additionally, a court could decide that one spouse can pay more than the other and divide the debt accordingly. Don’t assume going into the divorce that the court must divide all credit card debt in joint names equally.

Keep in mind that when a credit card account is held jointly, you can’t simply remove yourself from the account. As a result, you should make sure all joint credit cards and lines of credit are closed as part of the divorce settlement. Also, watch out for a spouse who tries to transfer balances from their individual credit card accounts to joint accounts or who runs up the balance on a joint account during the divorce to make you liable for the debt you were unaware of at the end of the divorce.

Sometimes, there are exceptions to the rules. During divorce proceedings, the judge has the right to assign a credit card debt to you, even if you aren’t technically liable for it. For example, you could be on the hook for a credit card debt that’s only in your spouse’s name, depending on what it was used for. The same rule goes for your spouse. He or she could be held responsible for a debt that’s solely in your name if the judge assigns the debt to him or her in a Judgment of Dissolution of Marriage.

This can get complicated, however. A divorce judgment won’t change the contract on the debt, which means the original account holder will retain their responsibility as far as the creditor is concerned. If your spouse refuses to pay the assigned debt, the credit card issuer may come after you. The creditor has a right to continue their collection efforts since the original agreement was between you and the credit card issuer. A divorce judgment does empower an ex-spouse to sue their former spouse if he or she doesn’t handle a debt assigned to him or her, though.

Also, know that if you have a joint credit card, you can’t just remove yourself from the account. You’ll either need to pay off the balance or continue to make minimum payments until the card is paid off before you can close the account.

Credit Card Reward Programs

Usually, when discussing credit cards and divorce, we think of who must pay the debt on a given card. But credit cards also have a variety of rewards programs that can be rather lucrative to some users – points in a rewards program for frequent flyers, for example, may be worth thousands of dollars in free flights. Who gets the rewards in the event of a divorce?

Rewards programs are no different in the eyes of the law than any other property. If the rewards were accumulated during the marriage, the rewards are considered marital property, regardless of whose name is on the card.

If a spouse wants to overcome the presumption that the rewards should be marital property, that spouse would have to show that he or she earned the points before marriage or as an exclusive benefit through employment. For some spouses, this may be an impossible task.

If spouses must divide the rewards, what do they do? Most rewards programs charge a fee for transferring points. Given the fee, it may not be worth dividing the points in this manner, and spouses may seek to offset the loss in the rewards program with another marital asset.

In deciding how to handle reward points during a divorce, you should first determine how much is at stake. If the value is minimal, it would not be worth litigating. If it is very significant, it is worth including in the property settlement and may be leveraged to get a certain asset the spouse desires.

Do not assume that points on a card belong to the spouse with the card – you may be giving up a large sum of marital property.

Should you need the assistance of an experienced divorce attorney in Creve Coeur and O’Fallon or have questions about your divorce situation, know that we are here to help and ready to discuss those questions with you.

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