What Happens To Your Credit Card Debt In Divorces?

A 2013 study showed that nearly 40 percent of U.S. households have credit card debt, with an average of $5,700 in debt. When a couple is getting divorced, credit cards are one of the many things that need to be taken care of. Who gets the debt? Who keeps the card?

Like property, debt in Colorado is divided equitably, not necessarily equally. The courts will look at the total assets and debts of the couple, among other factors, to determine what the fairest split would be.

The first step in solving this issue is identifying which debts you are responsible for. Your credit rating and debts are allocated to your name, and the only way to view this is by requesting your credit report from one of the three major reporting bureaus. This report will inform you which debts are yours and which ones you share with your spouse. From there, you can start the process of removing your name from those joint accounts and closing them where necessary.

A word of warning: you should be diligent in paying all your bills, including those you share with your spouse, both before and after your divorce filing. Divorces can get contentious, and if you name is on an account and your spouse stops paying for it, that can hurt your credit. While many card companies will not allow you to close an account with a balance on it, you may be able to have the company freeze any joint accounts to protect your credit until divorce is finalized.

Denver divorce law attorneys assisting clients in Colorado in matters of property and debt division during divorce.

Your Life, Your Credit: How NOT To Destroy Your Credit In Divorce

The effects of divorce can linger for a long time after the settlement is final. Divorce can cause a huge strain on your credit, so it is best to plan ahead to preserve your financial future.

How To Prevent Damage To Your Credit After Divorce

  1. Before you can plan for post-divorce credit, you should know where you stand currently. It’s astonishing how common it is for people’s credit reports to be incorrect. So, step one is to pull your credit report. You can request a free report once per year from each of the three reporting agencies, or you can look online for free services like CreditKarma for an estimate. You’ll want to look for things like collections notices that are incorrect, lines of credit that you did not open and things of that nature. Dispute any errors you can, as they can make it difficult for you to secure new lines of credit (which you might need considering the costs of divorce).
  2. Although getting your credit in order makes it easier to open new lines of credit, you will want to avoid opening new lines of credit that are unnecessary. Only open new lines of credit when you have no other choice ”“ you don’t want to overextend your finances, and there are still things like attorney fees, daily expenses and unexpected expenses like security deposits on a new place to live to consider.
  3. Budgeting is the name of the game. Presumably, you’re moving from a two income household to a one income situation. You’re likely going to have to make some cutbacks and prioritize what is really important. Making sure you are able to pay your bills on time means that you can preserve your credit rating so that you are able to take out any necessary loans you will need (student loans, car loans, mortgage loans) moving forward in your life.
  4. Make sure that you close all joint accounts with your spouse before your divorce is final. If your name is still on an account with your spouse after divorce, then his or her debts and spending habits could come back to bite you.

The Denver divorce attorneys at Divorce Matters handle all aspects of family law, including preparing our clients for the financial changes they will experience post-divorce.