Credit Card Debt and Your Divorce Settlement
Credit card debt is an everyday fact of life for most Americans, but it can cause additional stress in the context of a Florida divorce. If you or your spouse have extensive amounts of credit card debt, a family law attorney can help you determine what portion of the debt, if any, is your responsibility.
Florida law requires that marital debt be distributed equitably between spouses during a divorce. This means that both parties are generally responsible for any debt accumulated during the marriage, regardless of whose name is on the charge account. However, if one spouse can prove the debt existed before the marriage, the debt should not be treated as a marital obligation, and a judge may order the original debtor to pay the entire debt. Problematically, credit card companies are not bound by court orders allocating responsibility for debt.
For example, Husband and Wife are getting a divorce and they owe $6,000 on three different credit cards. Husband has a balance of $1000 on an American Express card in his name. The American Express Card is only in Husband’s name and the entire balance existed before the marriage. The couple owes $500.00 on a joint Visa charge account used to buy groceries and household items. Additionally, Husband and Wife owe $4,500.00 for home repair items on a Home Depot credit card taken out in Wife’s name.
What is “Marital Debt”?
Under Florida law, debt incurred during a marriage is presumed to be marital debt. Likewise, debt that one party accrues individually before marriage is generally be non-marital debt. Based on the facts of this example, the $1,000 American Express balance is Husband’s non-marital debt. The Visa and Home Depot cards were used during the marriage to acquire household goods and to improve the value of the marital home, so the $5,000.00 owed on these cards is marital debt.
Who is responsible for paying for marital debts?
There is a general presumption that marital liabilities (and marital assets) should be distributed equally between the parties. However, Florida law requires the EQUITABLE, not equal, distribution of assets and liabilities in a divorce. To determine what constitutes an equitable distribution of marital debt, the court will consider many factors, including: each person’s contribution to the marriage, any contributions one party has made to other person’s education or career, whether either party has intentionally depleted or destroyed marital assets and other equitable factors.
Why the judicial disposition of credit card debt leaves you at risk:
A divorce decree will order the parties to pay their respective shares of the credit card debt, but this can still leave one, or both, of the parties in a precarious financial situation. Credit card companies are not required to abide by a divorce settlement and, instead, will hold whomever is listed on the account responsible for the debt. For example, if the $5,000 in marital credit card debt was divided equally between Husband and Wife in the example above, the credit card companies could hold Wife legally responsible for all of the debt! This is because one card was taken out in her name and the other card was opened by both parties. If Husband fails to make payments on his portion of the debt—or even makes one or two late payments—Wife’s credit score could be adversely affected and she might face serious financial repercussions.
How you can protect yourself:
An experienced divorce attorney can help you structure your divorce settlement in a way that prevents exposing you to these risks. For more information on reaching a divorce settlement that protects your long-term financial stability, contact one of Koch & Trushin’s family law attorneys for a free initial consultation.
