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How to cut card ties during a divorce

Erica Sandberg

April 26, 2016

Q Hi Erica,

I am divorcing my husband of seven years. What should I do about our credit cards? I want out of everything. He doesn’t want the divorce and is fighting me at every step, which is making this so hard. — Violet

A Dear Violet,

My first suggestion: Make every effort to be kind while also treating this situation as you would a business dissolution. Be objective, not emotional. In my experience with divorcing couples, most financial mistakes are made out of spite and anger and can result in credit damage, depleted savings and huge legal bills.

In a divorce, each of you will walk away with your personal credit cards, but separating shared accounts isn’t always easy. The best case scenario is that one of you is the owner and the other is an authorized user on the account. If your husband opened the card in his name, you usually can call the issuer and say that you no longer want to be associated with the account. The issuer then will cancel your charging rights, and the account no longer will be listed on your credit reports.

If your husband is an authorized user on your card, either one of you can call the issuer and request he be taken off the account. Do tell him first though. I consulted with Lisa Decker, a certified divorce financial analyst from Atlanta and author of “How to Divorce Your Spouse, Not Your Money,” about your situation. She cautions against dropping a spouse from a credit card he normally uses while you’re in the midst of separating. First, she says, ask your attorney if you should drop him from the card, because it could cause a firestorm. “The court may frown on your behavior,” she says.

Joint accounts (sometimes called co-signed accounts) are another story, as both of you are equal owners. As long as there is no balance due, either one of you can contact the credit issuer to close the account. If there is a balance, the account usually can’t be closed until the debt is zero. However, you may be able to suspend use of the card so neither of you can charge with it and add to the balance. Call the issuer and ask how best to proceed. Then focus on paying off the balance. Talk with your husband and make every effort to arrange a reasonable action plan. Remember: You want to spend the least amount of time in court and dealing with expensive lawyers.

With your husband’s personal cards, if there is a balance, you probably won’t be held responsible for it. The same goes for your personal cards; he is unlikely to be liable for paying off your debt. The exception would be if you live in a community property state, since both assets and liabilities acquired during the marriage are typically split down the middle. The community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin (Alaska, too, if you opted to be jointly responsible for debt.)

During divorce proceedings, the judge may assign each of you an amount to pay off the joint account credit cards. It’s important to honor this decree because the credit issuers can collect from either party on joint accounts, no matter who is “supposed” to pay. Note that credit card companies are not bound by the terms of a divorce decree assigning the debt to you or your spouse.

But if the person the judge ordered to pay off the cards fails to make the payments, that party will be in violation of the court order. Then things could get really messy, and this may include fines and court penalties. Oh, and each of you will find your credit is damaged because a card issuer will send information about delinquencies and charge-offs to the credit reports of all account owners. So play nice — at least until you’re in the clear and can permanently delete the accounts.

In the meantime, says Decker, open a new account in your name only if you don’t already have one, especially if closing long-standing, well-managed accounts will cause your credit score to sink. This is one way you can start to rebuild your credit after a divorce.

Got a question for Erica? Send her an email.

SEE ALSO: Avoid credit and debt disaster during divorce

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