Dealing with credit card debt during divorce

Minimize exposure to your ex-spouse’s financial misdeeds by taking responsibility for paying off joint credit card debt or ensuring that all joint credit card debt gets repaid before your divorce is settled.

Americans love credit cards. According to the Federal Reserve Bank of New York, we Americans have a total credit card balance of $856 billion.[1] In 2021, the average American had a credit card balance of $5,525.[2] It comes as no surprise that most divorcing couples have credit card debt. In general, you have three options for dealing with joint credit card debt in a divorce:

Option 1: Assign your ex-spouse the responsibility of paying off the debt after the divorce.

Option 2: Pay off the debt before the divorce is finalized.

Option 3: You take responsibility for paying off the debt after the divorce.

Is the credit card debt the result of your spouse’s uncontrolled spending? If so, it might feel good to make your spouse responsible for paying off the debt. After all, they ran up the balances, so shouldn’t they be responsible for paying them off? If the divorce decree states your spouse is responsible for repaying the debt, you might feel a sense of relief that the debt is finally behind you and that justice has been served.

However, this sense of relief will be short-lived if your ex-spouse refuses to make payments on the debt. Why? Because regardless of what the divorce decree says, you will still be on the hook for repayment with the credit card companies. The credit card companies don’t care what’s in the divorce decree – they will come after both borrowers for repayment.

Sure, you might be able to take your ex-spouse to court to compel debt repayment. But what will that cost you in legal fees, time, and headache?

The moral of this story is that when you have financial ties to another person, their financial decisions put you at risk.

Avoid having to rely on your ex-spouse to make payments on joint debt. Consider paying off all joint credit card debt during the divorce. Yes, it’s crummy having to pay off debt that you weren’t responsible for accruing. If you don’t have enough cash on hand to make the payment, you may have to sell something to get the cash, such as an investment that you would prefer not to. If paying off the joint credit card debt is not an option, consider taking responsibility for the debt repayment in exchange for a greater portion of the marital assets. Keep in mind that this option will cost you more in the long run (because the longer it takes to pay off the credit cards, the more you will end up paying in interest).

While these options are far from ideal, they certainly beat the flip side, where you’ve begun a new chapter as a single person and the credit card companies are hounding you over debt your ex-spouse was supposed to repay.

This information is educational in nature and should not be relied upon for legal or tax advice. Serene Divorce Planning LLC is not an attorney and does not provide legal or tax advice. Individuals seeking legal or tax advice should solicit the counsel of competent legal or tax professionals knowledgeable about the divorce laws in their own geographical areas. Serene Divorce Planning LLC does not sell or consult on securities.

[1] https://www.lendingtree.com/credit-cards/credit-card-debt-statistics/

[2] https://www.fool.com/the-ascent/research/credit-card-debt-statistics/