Credit cards provide short-term financial options for covering costs in between paychecks. Credit cards can help cover unexpected expenses and unusual costs, ranging from car repairs to holiday gifts. Many families have multiple credit cards in use, some of which may offer cash back or other rewards based on spending habits.
Individuals preparing for divorce may think about retaining valuable assets, like vehicles and homes. Financial obligations, including credit cards, often do not receive the same consideration in the early stages of divorce planning. Despite how easy they are to overlook, credit cards can quickly complicate divorce proceedings.
Disputes about who should pay
As a general rule, credit card debts that people accumulate during marriage are subject to division when they divorce. Regardless of whose name is on the account, balances accrued during the marriage may be divisible. However, certain debts might have existed prior to the marriage or may have been a secret debt taken on without the knowledge of one spouse. It is sometimes possible to exclude debts related to dissipation, deception or infidelity from the pool of marital property and debts.
Issues with a lack of credit
Often, married couples take out joint lines of credit. Both spouses are co-signers for these credit cards, meaning that they are both responsible for the debt. It is standard practice to freeze or close such accounts at the time of an initial divorce filing. People may face an immediate loss of their revolving lines of credit and may need to apply for personal cards. Obtaining a separate line of credit to use after the initial divorce filing is often an important part of the process of preparing for divorce.
Concerns about defaults
Whether the spouses were cosigners on a debt or the courts declare one spouse responsible for a credit card balance on an account in the name of the other spouse, one spouse could end up facing financial and legal challenges due to the defaults of the other. Even when there is a family court order instructing one spouse to pay certain debts, the other spouse could still be subject to civil litigation brought by creditors. If one spouse files for bankruptcy after the divorce, for example, the other may end up facing collection activities.
People need to have a realistic idea about how property division matters could affect their financial stability during and after a divorce. Exploring various issues that are likely to cause stress and disputes during divorce proceedings can help people ready themselves to make a major change.
