A marriage ends once the divorce decree is finalized; however complications involving joint credit card debt can live on long after the divorce is over. Many times one spouse will be assigned all or a portion of the marital debt as stipulated in the divorce decree.
However, credit card companies could care less what you and your former spouse agreed to in court. They see the credit as a legal obligation of both parties and will therefore enforce the debt obligation for either owner on the account regardless of marital status. So if your ex fails to make monthly payments or files for bankruptcy your creditors can, and will, go after you for the full amount of the debt, plus interest and penalties.
Even if there is wording in your divorce agreement that requires your ex-spouse to pay these debts, you will have to go back to court to get this enforced. Not only can this be time consuming and costly, but in the meantime the debt load, payments and default or referral to a collection agency will negatively impact the credit report of both account holders.
The best way to avoid future debt issues is to make sure there is no joint debt remaining at the end of your marriage. So while you are still married you should establish credit in your individual name. You also need to determine any and all outstanding individual and marital debt. One way to do this is by requesting a credit report from each of the three major credit-reporting agencies: Transunion, Equifax, and Experian. Detailed in these reports will be a listing of your various accounts, the date each was opened, the credit limit or loan amount, and the account balance and payment history. You can request this information for free online at www.annualcreditreport.com or by phone at 1-877-322-8228 from each of these agencies once every 12 months.
If at all possible it is best to pay off all joint cards prior to or at the time of divorce using joint assets. If this is not possible then divide up the debt and transfer it to credit cards in each spouse’s single name. Finally make sure that all joint cards are cancelled so that no additional debt can be incurred.
Donna M. Cheswick is a Financial Consultant and Certified Divorce Financial Analyst with BPU Investment Management Inc. She can be reached at 724-837-1130 or dcheswick@bpuinvestments.com.
