Friday, May 10, 2013

You May Be Liable for Spouse’s Credit Card Debt


Creditors Could Come After Your Assets




So you and your spouse have decided to part ways and begin to live separate lives. One spouse begins to rack up credit card debt during massive shopping sprees. The other spouse doesn’t worry because separate lives means separate financial obligations, right?

Not necessarily. Several factors come into play that you should be aware of to fully gauge whether these charges are your responsibility or not.

Equitable distribution guidelines

First of all, each state has different laws that apply to these types of scenarios. In New Jersey, this scenario would fall under “equitable distribution” guidelines that dictate that marital assets and liabilities are to be divided fairly. This does not necessarily mean that these assets and liabilities will be divided equally, just fairly. For example, the courts may consider each spouse's income and other such information.

Also, your attorney could argue on your behalf that you shouldn’t be held responsible for these liabilities if you or your kids did not benefit from them. Courts generally consider whether credit card debt was incurred for the sake of the family as a debt for which both spouses are liable. However, if the debt was incurred for activities such as gambling, then the court will not consider this is as debt incurred for the sake of supporting the family.

Another factor that could determine whether you’re responsible for those charges is whether you originally signed on as an accountholder for the card or cards used during the transactions. This could be the way you absolve yourself of responsibility for these charges - unless your spouse defaults on payments and the creditor wins a judgment that allows the company to go after your joint assets.

Wouldn’t it be better to close joint accounts?

Of course, the easiest way to rid yourself of any future credit card debt racked up by your spouse is to close any joint accounts or remove your name from the account. But you cannot do this unless the account balance is zero. In this case, you and your spouse should work out a repayment schedule or try to sell one of your assets to pay off  joint credit cards so that you are not saddled with credit card debt from your marriage once your divorce becomes final.

As a safeguard, you also could write to credit card companies advising them of your separation.

We recommend you consult an attorney who can determine whether you are liable for any of your spouse's credit card debt.

Photo credit: 401(K) 2013

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