Credit Card Debt and Divorce: Who's Responsible for What?

Woman signing divorce papers.

The following is being provided for informational purposes only and is not intended as legal advice. 

Divorce is an unpleasant process, even if the outcome is in everyone’s best interests. Part of the unpleasantness comes from splitting a single household into two. Over the course of a marriage, you collect a good many things together – including debt. And since debt happens to be one of the few things you’ll fight to not keep, you may be wondering exactly what happens to your debt when you get divorced.

Understanding Marital Debt

As part of the divorce process, you'll identify all of the existing "marital debt". Marital debt is all of the financial obligations incurred during the course of the marriage. This includes credit card debt, loans, mortgages, and other liabilities.

In some jurisdictions, debts acquired before marriage might also be considered marital debt if they were used for the mutual benefit of the couple.

Debts are Divided through Negotiation

Divorce often involves a lengthy period of negotiation, where both sides try to divide assets and responsibilities in a mutually acceptable manner. In the event there are issues that the two parties cannot resolve through negotiation, the matter may go to trial, in which case a judge will provide an order of dissolution determining how everything is divided.

If everything is settled during negotiations, then the fate of your debts will be decided there. You may choose to split everything evenly, or one party may take on a greater share of the debt in exchange for a larger share of the assets (such as the house).

If you end up going to court, the judge will weigh all available factors before deciding what happens with your debts. The judge will attempt to make a fair and equitable split of your assets and liabilities based on various factors such as each party's financial contributions, earning capacity, and more.

Ultimately, whether you go to court or negotiate the terms of your divorce, everything will be spelled out in detail in a divorce decree.

Legal Responsibility and Divorce Agreements 

In most states, it’s generally presumed that if a debt is in your name, it’s your responsibility. This becomes a little muddy in the small handful of “community property” states.

In community property states, spouses are considered joint owners of nearly all assets and debts acquired in marriage, no matter who paid what. In these states, debts incurred during a marriage (but not before or after) are generally viewed as being community debts, with both spouses sharing equal liability in the eyes of the law. Exceptions are made, however, and you could argue that a particular debt did not benefit the household, but instead only benefited one spouse.

Community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Alaska is not a community property state, but you do have the option to make your property community property if both spouses create and sign an agreement.

And it's important to know who is legally responsible for a debt, because the arrangements that you make during divorce negotiations don't supersede whatever laws govern the debts in question, which matters if one party stops making their agreed upon debt payments. 

Creditors Don’t Care about Divorce Decrees

That may sound a little harsh, but the truth is that no matter what decisions are made between you, your former spouse, your divorce attorneys, and the judge, you already have an agreement in place with your creditors and they intend to hold you to that agreement.

This is very important to keep in mind. If your name is on an account (and not merely as an authorized user), the creditor will hold you responsible for the debt. If your former spouse agrees (or is required) to repay a debt and doesn’t, your credit can be damaged and the creditor can begin collection activities against you. And if your former spouse files for bankruptcy, the responsibility may shift to you (presuming you have some legal liability for the debt).

Thankfully, while your creditors may not care about what’s stated in your divorce decree, the court does, and you can potentially sue your former spouse for damages if they fail to repay those debts as agreed upon.

Minimize Pain by Being Proactive

No matter how cordial and civil both parties may be, divorce can be painful. Of all the things you’ll be working through together, credit card debt will probably be a lower priority, but there are definitely ways you can make that part of the process less difficult.

Split up your accounts quickly, cleanly, and thoroughly. If a spouse is an authorized user on your account, have them removed. If you have any joint accounts, decide who will keep the account and contact the applicable creditor to have the second party removed. If you can’t decide who keeps the account, close it and open a new account in your name.

Pay off or transfer debts ahead of the divorce if possible. The act of splitting up debts can be messy and, as noted, even if your order of dissolution says you aren’t responsible for a debt, your creditor may disagree, and you can suffer if your ex-spouse fails to make their payments. You may be able to sue your former spouse for damages in that scenario, but it would much easier for all parties involved if those unsecured debts were simply paid in full ahead of time.

If you don’t have the ability to clear those debts before the divorce, it’s a good idea to instead transfer them to accounts controlled solely by whichever party the court has ordered to repay the debt. This way if your spouse doesn’t make their debt payments, they’ll be the only one to suffer.

Dealing with overwhelming debt as a result of a divorce or separation? A debt management plan (DMP) might be the ideal way to reduce your monthly payment and accelerate your debt repayment through big interest rates reductions. Complete a brief, confidential online analysis to see how much you can save with a DMP.

Tagged in Laws and legal questions, Money and relationships, Navigating change

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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