During divorce, there are many difficult issues that spouses have to discuss, negotiate or litigate. Choices that affect future financial stability are among the most important matters to address during divorce.
The marital estate is typically subject to division when people divorce. The law requires a fair or equitable division of marital income and property acquired during the marriage. Spouses have the option of either settling property division matters or litigating if they cannot agree on terms.
Equitable distribution rules apply to more than just shared assets. Marital debts are also part of the marital estate. Frequently, credit cards are among the biggest financial obligations that spouses must address during divorce. How can spouses fairly share their credit card debt?
By identifying separate and marital debts
The first step toward a fair allocation of marital debts involves reviewing account statements to see what is separate and what is marital. Even when a credit card may be solely in the name of one spouse, it may still be a marital debt.
For example, if one spouse took out a credit card and used it to pay for utility bills and groceries, the debt helped to support the marital household. Typically, any debts accrued during the marriage are subject to division when spouses divorce.
However, there are exceptions for debts that constitute dissipation. If one spouse spent an unreasonable amount on personal purchases immediately prior to filing for divorce, the courts may agree to exclude those debts. The same might be true for hidden debts in cases involving financial infidelity or credit card debts related to adultery in cases involving romantic infidelity.
By looking at the big picture
Equitable distribution does not mean an even split of property and debt. Factors including the contributions of both spouses, their health and their earning potential, as well as the length of the marriage, can impact the most appropriate and fair way to divide assets and debts.
Those trying to negotiate an equitable property division settlement must consider how they intend to allocate their property, the other debts in the marital estate property of each spouse and even their custody arrangements for their shared children. The outcome should be fair based on the totality of the circumstances.
People may also need to consider the possibility that their spouses may not follow through on their promise to pay the credit cards as they should. One spouse defaulting on a joint credit card may mean that the other faces collection efforts and other credit consequences long after the divorce.
Reviewing financial records and state statutes with a skilled legal team can help people set reasonable property division goals. Credit card debt can have a major impact on the distribution of other assets and the overall outcome of property division during divorce.