Is My Soon-to-Be Ex-Spouse Responsible for My Credit Card Debt?
Data from the Federal Reserve Bank of NY and the Census Bureau reports that households are carrying credit card balances averaging $16,061. Credit-card interest rates are averaging roughly 18%; U.S. households average around $1,292 in yearly debt interest. Financial issues are a commonly cited reason for couples choosing to divorce.
Credit Card Impact on Spouses Depends on Whose Name Is on the Card
Credit card accounts in marriages can be in the name of one spouse, making that individual solely liable for credit purposes. If the credit card is in the name of both spouses, then they would both be jointly liable. Often one spouse will be the account holder, with the other spouse considered an authorized user, so that both parties can use the card if and when needed. In this arrangement, the credit of the authorized user will not be impacted regardless of the good or bad status of the debt.
Common Law Property vs. Community Property
Nine U.S. states are considered community property states, meaning all assets accumulated during the course of marriage are equally owned by both spouses. Massachusetts, though, is among the states under a common law system in which a spouse may acquire an asset (or debt) solely in his or her name and have sole ownership and responsibility for it. The exception is when an asset is placed jointly in the names of both parties.
Marital Property in Divorce
Credit card debt in marriages entering divorce proceeding will likely be subject to equitable distribution if considered marital property. Debts are “negative assets” when it comes to equitable property division. Couples unable to reach agreements that are mutually acceptable must rely on the court’s decision; courts may simply gather all assets without considering their sources, and make what they deem to be a fair division. Typically, specific property will be assigned to each spouse; if the balance of assets does not make this possible, then the asset can be sold and proceeds divided. Common examples: a spouse who is assigned a vehicle would be responsible for that loan, or the spouse remaining in the home would assume the mortgage.
Spousal Credit Card Usage During Divorce
A very common concern that a spouse may have is financial liability associated with the other spouse’s continued accrual of credit card debt during the actual divorce process. In Massachusetts, the Supplemental Probate and Family Court Rule 411 prevents one spouse from creating further debt subject to equitable division. It is a form of a restraining order with the following provisions during the pendency of the divorce:
- Neither spouse may sell, hide, or transfer the property except for paying reasonable living costs, in the typical course of business or investing, or for payment of attorney fees associated with the case.
- Spouses may not accrue debt that could impact the credit of the other or borrow using marital assets as collateral.
- Beneficiaries of retirement accounts, life insurance policies, and any involving minor children are to remain unchanged.
At DiBella Law Offices, P.C, we function as legal counsel representing clients going through the often emotional process of divorce. We are available for those in Burlington, Boston, and Methuen. Contact our experienced divorce attorneys at (978) 327-5140 for a consultation.