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The Dangers of Credit Card Debt When You Divorce

BY IN Divorce

The average American owns four credit cards with an average credit card debt of about $6,000.  When couples divorce, their assets and debts must be divided equitably. This property division must be equitable. Equitable means fair; not necessarily equal; although for many divorcing couples, the division of assets and debts is equal or close to equal.

During the divorce process, the spouses must reach an agreement on how they will divide their assets and debts, or the judge will decide on an equitable division.

Clients often ask us whether they will have to pay their spouse’s credit card debt when their spouse obtained a credit card and incurred credit card debt without their agreement.  Let’s deal with that question first.

When Your Spouse Incurs Credit Card Debt Without Your Agreement.

Michigan law requires the court to determine which assets and debts are separate and which ones are marital. The judge will equitably divide the marital assets and debts. Michigan law does not require that spouses must first reach an agreement on the purchase of an asset or incurring debt.  And, logically, people do a lot of things during their relationship without their partner’s agreement or permission.   They go to the store, buy groceries, and children’s clothing, and they do so without an agreement or permission. 

Because Michigan law requires an equitable division, not an equal division of assets and debts, you could point out to the judge what kind of charges your spouse incurred.  For example, if your spouse bought groceries for the family, clothes for the children, paid for a roof repair, you should assume that the judge will require you to pay your fair share of that debt.  However, if you find that your spouse used the credit card solely to pay for visits to a new boyfriend or girlfriend, you could argue that this is a separate debt for which only that spouse received a benefit. However, the cost of litigating this position may exceed the benefit.

Common Problems with Credit Cards and Divorce.

You Are Not Aware of All Credit Cards.

Our clients usually know about the credit cards that they use frequently, but they forget about the store credit cards that they used once many years ago.  Even so, this credit card may have a balance that was incurred by your spouse or could be used by your spouse during the divorce proceedings.  You should obtain a credit report to learn which credit cards and debts you have. 

One Spouse Keeps Using the Card.

In most contentious divorces, it will be helpful to close all joint credit cards.  First, get a copy of your credit report to find out which credit cards you own. Second, call or write the credit card company and ask them to remove your name as an authorized user from the card.  You will still be responsible for any outstanding balance, but you will not be responsible for future charges.  Make sure you receive a written confirmation. Similarly, if you own a credit card that you regularly use and your spouse is an authorized user, remove them as an authorized user. 

One Spouse Does Not Make the Required Minimum Payments.

During the divorce proceedings, the judge will often require one party to pay the minimum payments towards a credit card balance.  However, not everyone always abides by a judge’s order. Your spouse’s lack of court-ordered payments will hurt your credit score.  You will benefit from maintaining the best credit score possible during the divorce.  You may need to get a mortgage to buy a new home or refinance your current home.  Check if your credit card company will email you in case of non-payment or check online regarding the payment status.  Your attorney can request that your spouse be held in contempt of court for lack of payment.

One Spouse Does not Pay the Required Debt.

Surprisingly, a credit card company may (and likely will) ignore the judge’s order requiring one spouse to pay the credit card balance.  This means that after your divorce is final and your spouse is required to pay the balance of the credit card and fails to do so, the credit card company may sue you for the balance due on the card.  A well drafted Judgment of Divorce can protect you in this regard. 

Not all Credit Cards are Addressed in the Judgment of Divorce.

When a spouse fails to check their credit report or participate in discovery, they may learn about an outstanding credit card balance after the divorce is finalized.  Such a surprise often creates conflict and litigation belatedly to determine who must pay this balance.

Building your Credit.

In many relationships, one partner pays all the bills, and consequently, all utilities and credit card accounts are in that spouse’s name.  The other spouse has a poor credit history and credit score.  If you are the spouse with no credit history, open a credit card, and make some minimal charges and consistently and timely make payments to start building a better credit score.  

The Benefits of a Well Drafted Judgment of Divorce.

When clients can agree on a property division either on their own or with the help of mediation, they will benefit from finalizing their divorce with a well drafted Judgment of Divorce.  If you are reading to start your divorce proceedings and need a Judgment of Divorce, contact the attorneys at Kraayeveld Law. We provide our clients with a full range of services from litigating a contentious divorce, guiding our clients through the mediation and settlement process, or offering a flat fee for a well drafted Judgment of Divorce.  Call our Grand Rapids divorce attorneys at 616-285-0808 to see how we can help. We look forward to meeting with you.