When you are planning to get a divorce, then you must look out few things. One of which is credit card debt which you were using as a couple.
The credit card which you both were using will be in your name, and both of them are responsible for their outstanding debt after divorce.
There may be many questions arising you have, such as how the credit card debt will be divided and who should pay for it.
This post covers how to manage credit card debt after divorce.
Who is Responsible for Credit Card Debt?
You must handle your credit card debt in a way that does not affect your credit scores.
There are certain factors that must be considered before deciding who should pay the debt, such as:
- Credit card owner’s name.
- Did you obtain your credit card debt before, during, or after the wedding?
- State you live in.
- Settlements in divorce.
When there is one authorized user for the account, they are fully responsible. In most cases, both spouses are responsible for the credit card debt and creditors will not consider who was making payments before the divorce.
In some cases, the judge has the right to give the credit card debt to you, even if you are not responsible for it.
For Joint Accounts
In a joint credit card account, both of them are responsible for credit card debt. Even though the other spouse did not properly use your account, they are also responsible for the debt. A judge will come to the conclusion that one spouse is capable of paying more than the other.
When a spouse co-signs for a credit card, the primary user does not get their own account. It means that co-singer will take full responsibility for their own account.
Stop Spending a lot on your Credit Card before Divorce
When you are planning to file for a divorce, you must think about your financial reports. Have a look at them before filing a divorce, because it is good to know the status of your finances.
Your credit card plays a major role in deciding your credit score, so it’s best to ensure that your credit scores are not taking a hit during your divorce.
You must control your spending limit on your credit card before the divorce because the credit card debt will increase if you do not.
Your credit score gets affected when you have late payments or any missed payments. If you choose to remove yourself as an authorized user, then your credit scores are affected.
So finally, it becomes who will be responsible to pay off the debts, but the credit scores belong only to you. They are not affected because of your marriage or divorce.
You must have proper control of your spending limit during your divorce because it is challenging to handle your credit after divorce.
Close All the Joint Accounts
Dividing a joint account and debt is the toughest part of a divorce in the financial world. When you cosigned a loan with your spouse, then you both are responsible for the debt.
It is better if you close all the joint accounts during the divorce. Your credit score will go down when you close your account, but if you are not willing to close the account, then you are risking your credit score for your future financial life.
The marital property is divided equally between the spouses. It includes all the financial data, like bank savings, car loans, and much more.
Your spouse’s name cannot be removed from the joint account without their permission.
You should close your account when you have zero balance after dividing the funds. You may close the joint account along with your spouse or you can close the account by asking your spouse to sign the documents.
Before you close your joint accounts, you should contact the creditors involved in transferring the transactions to your new account.
Your credit scores are based on your credit reports. It includes opening and closing accounts. Closing a joint account will not lower your credit score.
Filing for divorce is a process because many people want to separate from their spouses and be financially free and you must protect your credit during your divorce. It is a difficult task, but if you don’t do it, you will not be qualified for getting another credit card or loans and mortgages.
Finally, the creditors are not worried about your divorce judgment, because they want to be paid back, so it all depends on you how you handle your credit card debt after divorce. It is better to be cautious of your credit card debt when you file for a divorce.
You will take five years to rebuild your credit. Since you need to be psychologically and financially strong after divorce.
Frequently Asked Questions
- Am I responsible for my spouse’s credit card debt?
No, you are not responsible for your spouse’s credit card debt. If you are a co-signer or you hold a joint account in your spouse’s name, then you are also responsible for the debt.
- How do I protect myself from my spouse’s debts?
Maintain separate bank accounts and loans separately. You may also maintain your credit cards separately. During the divorce, you must cancel all your joint accounts.
- Do I have to pay bills when I separate from my spouse?
You must talk to your spouse regarding the payments once you get separated. If you are staying in the same home, then it is better to change those payments to your name.
- How long does it take to financially recover from divorce?
It will take five years to rebuild your credit.