3 important considerations about marital credit card debt in divorce

On Behalf of | Nov 11, 2022 | Divorce |

Credit card debt is just part of modern American life. Many families require credit cards to stretch their budgets between paychecks, and even successful, professional households may have thousands of dollars in revolving credit card debt. Those debts can become a major hurdle as you start preparing to file for divorce.

There are multiple ways in which your current credit cards can impact your property division negotiations or the litigation process in your divorce. What do you need to consider when planning to address your credit cards at the end of your marriage?

How much of the debt is marital property?

You might think that the credit cards in your name will be your responsibility and the credit cards in your spouse’s name will be theirs, but that is not really how property division works. Debts accrued during the marriage are typically part of your marital estate even if the account is only in the name of one spouse.

The timing of when someone took on the debt will influence whether you have a responsibility to help pay it. In some cases, debts accrued while conducting an affair or as the result of intentionally lying about spending habits may not become the responsibility of the other spouse.

What happens with your rewards?

Some families pay hundreds of dollars annually in service charges for special rewards credit cards. The accrued balance on your points or miles could represent multiple plane tickets or hundreds of dollars in gift cards. The way that you divide those rewards can have an influence on other parts of the property division process, as they can prove quite valuable.

What happens if your spouse defaults?

Establishing the responsibility of one spouse to pay for a debt in a property division order in family court is not enough to absolve the other spouse of all risk. If you were both on the account when you first opened it, you could face collection activity if your spouse falls behind on payments even after the end of your divorce.

When there has been a lot of conflict or when one spouse has a history of financial irresponsibility, you may want to consider refinancing the debts during the divorce to minimize the risk of the other party defaulting on obligations that could eventually become your responsibility.

Considering the effect that credit cards may have on your financial future will help you as you prepare for your upcoming Colorado divorce.