Creative Approaches to Handle Joint Credit Card Debt in Divorce

It is Important to Have a Clear Notion of the Equitable Distribution Principle When It Comes to Dividing Assets in Divorce, Particularly in Relation to Joint Credit Card Debt in New Jersey

When people divorce, they are often surprised at how difficult it is to separate a joint household into separate ones. Aside from child custody and support matters, dividing assets and debts can be overwhelming. All the joint car loans, house loans, and credit card purchases over the length of a marriage need allocating. In some divorces, the division may be more challenging than in others.

Applying Equitable Distribution to Shared Credit Card Debt

In New Jersey divorces, the parties must divide all assets and debts equitably. That means that asset and debt divisions must be fair. That does not imply an even split down the middle. So, any property or income belonging to the spouses during their marriage is subject to a fair division depending on each spouse’s contribution to the marriage, financially and personally. In making an equitable division, a family court considers the income of both spouses and the caretaking responsibilities of each spouse, among other factors.

Making a fair division is not always easy, but one made with the practicalities of the parties’ circumstances and a mind to separate a couple so they may have a new start financially and otherwise. As such, marital settlement agreements often include a complex assignment of property, income, and debts, including offsets to make it fair. In other words, one party may get the house, while the other gets to keep their retirement benefits of equal value. They do not have to sell everything and split the proceeds to make an equal division.

Elements to Consider in Credit Card Debt Division

Debts acquired during marriage also need dividing. Who gets which credit card debt depends on several factors. For one, the distribution may be different for a joint account than an individual one. A joint credit card account is one with both parties as signatories to the credit card. Both spouses may have a card with their names on them, or one is the primary borrower, with the spouse as an additional authorized cardholder. Both spouses are indebted to the credit card company, and both suffer damage to their credit when the card is unpaid or paid late. And that is true even during and after a divorce. Credit card companies do not care about divorce decrees ordering one party to pay off a credit card. They want their payment from all parties obligated to pay and will hire collection agencies to get it.

That’s why it is essential to divide credit card debt carefully. Optimally, the spouses pay off all joint credit cards in the divorce. That allows each party to go their separate ways without lingering debt that one party must pay while the other party worries about whether the card is paid on time or that the payor does not run up new charges as an act of revenge or survival. Further charges can affect both spouses’ credit.

Options for Resolving Credit Card Debt in Your Divorce Case

Therefore, the best solutions are to close or separate a joint account into two separate credit card accounts. But that may depend on the cooperation of the credit card company. It may remove a spouse as an authorized credit card user upon request of the principal cardholder or make the spouses apply for new credit cards. Thus, when closing or splitting the card is not possible, or it is otherwise best to keep the card open for credit or childcare purposes, it is crucial to spell out the use and payment for the card in a marital settlement agreement (MSA). For example, one joint credit card may be the responsibility of one spouse to pay off with monthly payments or the responsibility of both, splitting the monthly payments according to their fair share.

So, when a joint credit card contains the debt that one spouse benefitted from more than the other, a court may assign the entire or most of the obligation to one spouse, especially when the debt is for gambling, computer equipment, or clothing purchases of one spouse. But when the card debt is joint purchases for household furniture, groceries, or child maintenance costs, the debt may be payable equally by both spouses. And once the agreement becomes a court order, the court can enforce the terms of the contract. So, when one spouse pays, but the other does not, the court can order the non-paying spouse to pay what they owe. Regardless of the family court order, however, the credit card company can go after either or both spouses when one does not pay their share of the debt or claims bankruptcy.

Another option to include is a future sale of the marital residence. Sometimes one spouse stays in the family residence while the children are minors, with a provision that the house sells by a specific date. The proceeds can pay off the remaining credit card debt when that date is near or within a few years. So long as the terms of the payoff are in writing, they are enforceable in a court of law.

Additional Card Benefits That Should be Included in a Marital Settlement Agreement

While it is best to get a clean start after a divorce, you may not be able to with a joint credit card open. However, sometimes it is necessary. For instance, one spouse may need more income or good credit to obtain another credit card, or the card pays for business expenses that benefit both parties. In cases of outstanding credit card debt, employ a family law attorney to help draft an agreement, including who pays the debt, how much, and for how long. It makes sense to give a deadline for paying off the card. And when credit cards include free airline mileage or bonus points that can apply toward the balance, that requirement should also be in the agreement.

Contact our Divorce Lawyers for Assistance Handling Joint Credit Card Debt at Our Little Falls Office

Our knowledgeable New Jersey divorce lawyers can create many ideas and solutions regarding credit card debt after examining the details of your situation in Montvale, Hawthorne, Haledon, Wyckoff, Caldwell, Montclair, Fort Lee, and elsewhere in Passaic County and Northern New Jersey. When you are divorcing, and credit card debt is an issue, contact the family law attorneys at The Montanari Law Group to help you resolve your divorce debts. We know the best for both parties is to start their new lives with a clear financial slate, and we can help you draft an agreement that accomplishes that as nearly as possible. You can reach us online or call (973) 233-4396 or toll-free at (888) 877-7985 to discuss your case today in a free consultation.