Dealing with the aftermath of a divorce or separation can be challenging, especially when it comes to the financial implications. But who’s responsible for joint credit card debt after separation or divorce? Let’s explore this issue in detail.
Understanding Joint Credit Card Responsibility
Joint credit cards, unlike individual ones, hold both parties responsible for the accumulated debt. When a couple separates or divorces, the responsibility doesn’t automatically dissolve. Here’s what you need to know.
The Concept of Joint and Several Liability
When a credit card is jointly held, both spouses are considered ‘jointly and severally’ liable for all debts. This means that the credit card company can demand payment from either party, regardless of who used the card or who accrued the debt.
“If you and your spouse have a joint credit card, both of you will be liable for the full amount of the debt, including any interest that accrues after the card is cancelled.”
The Role of Spousal Cards
Spousal cards, or secondary cards, can also create liability for the holder, even if they didn’t use the card themselves. The extent of this liability depends on the terms of the credit card agreement.
Post-Separation Credit Card Use: A Legal Minefield
The use of joint credit cards after a separation or divorce can complicate matters further. Here’s why.
Credit Card Debt and Divorce Agreements
Unlike other marital assets, credit card debt cannot be neatly divided in a divorce agreement. This means that your former spouse could still be held liable for debt, irrespective of the terms of your separation.
“In our example above, the credit card remained in both names after the divorce and as a result the credit card company has the right to look to the ex-spouse to cover the balance if the current user of the card filed for bankruptcy. This includes not only debts that existed at the time of divorce, but any charges made on this card after the divorce.”
The Limits of Divorce Agreements
Divorce or separation agreements cannot limit the liability of a joint cardholder from the perspective of the lender. Unless the credit card company expressly consents in writing, both cardholders will remain liable for past and future debts.
The Challenge of Removing a Joint Cardholder
Removing a joint cardholder or co-signer from a credit card account can be challenging. Usually, credit card companies will only agree to this if one party can prove they were solely responsible for the charges and can afford to pay the balance.
Proactive Steps to Minimize Financial Impact
It’s crucial to take proactive steps to minimize the financial impact of a separation or divorce. Here are some strategies to consider.
Cancel Joint Cards Upon Separation
It’s advisable to cancel all joint credit cards as soon as you separate. You can then open new credit cards in your individual names. This prevents any new charges from being jointly liable.
Cover Old Balances in Separation Negotiations
Ensure that the balance on the old card is addressed in your separation negotiations. This can help prevent future disputes and lawsuits.
Get the Credit Card Company’s Agreement
If your divorce agreement stipulates that one party is responsible for paying off the balance, ensure that the credit card company agrees to this. Without their agreement, the joint cardholder can still be pursued for payments.
Conclusion: Navigating the Trifecta of Divorce, Bankruptcy, and Credit Card Debt
Who’s responsible to pay joint credit card debt after separation or divorce is a complex issue that intersects with divorce law, bankruptcy law, and credit card agreements. Navigating this trifecta can be challenging, so it’s crucial to seek professional advice.
“Before you file a bankruptcy or proposal, contact us for a free consultation to ensure that the solution you choose will work for both you and your ex-spouse.”
Remember, the decisions you make today can have far-reaching implications for your financial future. So, take your time, do your research, and make informed decisions.
