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How to handle credit cards in a divorce


Spouses can take steps to protect their finances during a divorce.

Finances play a significant role in any divorce proceeding. Arguments over money are a leading predictor of divorce, according to a study by Sonya Britt, Assistant Professor of Family Studies and Human Services at Kansas State. During divorce proceedings, disagreements over assets, spending and debts are only likely to increase.

Assigning responsibility for debt in a way that is fair can help reduce the stress and combativeness of divorce. Credit cards, which are a significant source of debt for many married couples, can present some unique challenges that must be addressed before a divorce is finalized. These include preventing the other spouse from increasing joint debt during the divorce proceedings, finding hidden purchases or credit card fraud as soon as possible and determining who is responsible for paying joint debt.

Canceling joint debt

As soon as a person knows a divorce is imminent, he or she should cancel joint credit cards with the credit card company. Importantly, this does not just mean cutting up credit cards; it also means calling the credit card company to cancel. Otherwise, the other spouse could simply request another card from the company and use that to increase joint debt.

From a legal point of view, divorce involves just two parties – the spouses. Third parties such as banks, mortgage lenders and credit card companies are not part of the divorce decree. Therefore, they are not bound to the terms of the divorce agreement. In essence, this means that credit card companies can go after anyone whose name is on the credit card account when attempting to recover payments. Except in cases involving fraud or identity theft, this is true no matter who made the purchases, what time the purchases were made or who agreed to take on the debt in the divorce agreement.

If one ex-spouse fails to pay debt he or she agreed to in the divorce agreement, there are steps the other can take. These include holding an ex in contempt of court or suing to recover damages. However, these procedures take time and expense. It is better, if possible, to have no joint debt remaining after divorce. For example, one spouse could transfer joint debt to a card in only his or her name in exchange for something beneficial as part of the divorce agreement.

Credit card fraud

In other situations, a spouse may commit fraud by opening a credit card in the other spouse’s name. Credit card companies may then attempt to hold that spouse liable for the charges made on the card, even though it was opened fraudulently. In such cases, the consequences on the non-offending spouse’s credit can be disastrous.

Individuals who find themselves in such a situation should take action to protect their interests and their credit score. When a credit bureau improperly reports debt on an individual’s credit, the affected party should contact the bureau and dispute the report.

When the credit bureau is informed of the dispute, it will contact the company that provided the inaccurate information, the creditor. Under the Fair Credit Reporting Act, credit card companies are required to investigate any reports of suspected fraud and cannot hold borrowers responsible for unauthorized accounts and charges. In Virginia, the Fourth Circuit Court of Appeals has held that the creditor is required to perform a “reasonable investigation” to verify the accuracy of the information on the credit report.

In such cases, seeking the advice of a legal professional is a wise choice. A knowledgeable attorney will provide documentation to the credit bureau to demonstrate that the information on the credit report is inaccurate. In addition, aggressive follow-up with both the credit bureau and creditor is often necessary to ensure the improper information is removed from the individual’s credit report.

Contact an attorney

When going through a divorce, the emotions involved can make it difficult to concentrate on finances. Consequently, those seeking a divorce should contact an experienced family law attorney familiar with credit issues in divorce. A skilled legal representative can protect a person’s financial interests during the divorce and help to ensure that the other party does not take advantage of the situation.

Keywords: divorce, credit cards, fraud, joint debt