Splitting Credit Card Debt in Divorce
How is credit card debt divided in community property states? Are credit card accounts frozen upon divorce?
My wife and I are getting a divorce in Idaho, a community property state. We have approximately $50,000 in credit card debt. We will split this. after the divorce my brother said he could pay off my $25,000 to give me a fresh start. My questions are: 1. Are the credit cards frozen after a divorce- three are in my name and one is in hers. How is the debt split? 2. If my wife cannot pay her half and files for bankruptcy can the creditors come after me? 3. If I pay off my half immediately will I still be able to retain my credit cards. How does this work? My goal is that after the divorce is to get out of debt myself and not being connected to her financial situation. What is the best thing for me to do?
I am not aware of any freezing of credit card accounts upon divorce in community property states. (I am not aware of this being true in the common law states, either.) You may keep and continue to use your own separate credit cards before, during, and after the divorce. Customarily, community assets and liabilities are split 50-50 upon divorce in community property states.
Let us say for the sake of argument that upon divorce, you receive a gift and pay-off all of your credit card debt you were responsible for under the divorce decree. Your obligation under the divorce in this matter is satisfied. Alternatively, let us assume you make minimum payments. The divorce court does not care either way. Let us say that your ex-spouse defaults -- in other words makes no payments. If the account in default is in her name only, then the creditor has no legal means to pursue you for her debt because your spouse is not married to you.
Your best course of action is to close any accounts where you are the primary and your ex-spouse is an authorized user or cosignatory. Insist as a condition of the divorce that your ex-spouse do the same. You do not want any joint accounts. You do not want any accounts where you are a co-signer. You do not want any accounts where either of you are authorized users on the other's account.
Divorce and credit card debt generally
A divorce decree does not trump the contract terms in a loan. The contract was agreed to when the loan was signed by you and/or your spouse. The divorce did not rewrite the contract. You may ask, "But doesn't the divorce decree trump the loan contract?" No, it does not. Unless a court actually enters into an agreement to change its terms, an existing agreement remains in effect regardless of a subsequent divorce decree. The divorce is a new agreement between the spouses regarding their financial responsibilities, but it is not binding on third parties.
Consult with an attorney in your state who is experienced in family law. Ask him or her the questions you asked here, and act accordingly.
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