Editorial Policy

Could You Be Held Liable for Your Ex’s Credit Card Debt?

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By Eva Norlyk Smith, Ph.D.
November 2, 2010

Cardholders know that they are liable for their own credit card balances, but are there situations where one might wind up being on the hook for someone else’s credit card debt? Unfortunately yes, in the case of an unpaid credit card debt on a card held jointly with an ex-spouse or other family member, you could unwittingly end up holding the bag.

For example, say your ex-spouse rakes up $10 K in charges on a joint credit card you haven’t used for years, but which still carries your name, and then “forgets” to pay the debt? Unfortunately, as long as your name is still on the account, you are on the hook for the debt, even if you’ve been divorced for several years.

Similarly, in some situations, a spouse may agree to pay off the debt on a jointly held credit card as part of the divorce settlement, but fails to follow through on the agreement. In this case, the other spouse is still responsible for the debt, irrespective of the divorce agreement. From creditors’ point of view, how credit card bills and other types of debt are divided in a divorce is an issue between the two spouses. The credit agreement precedes the divorce, and it is not altered by any later agreements made as part of divorce proceedings. Hence, each party will still be responsible for paying back any debt incurred in a credit card account they signed their name to.

The same thing applies to a mortgage that is held jointly. If one spouse gets the house and agrees to take over the mortgage payments, should he or she fail to do so, the other spouse is still on the hook for the payments.

Not only does this put you in a situation where you risk being liable for someone else’s debt, once the other party defaults on debt payments, your credit rating will get trashed as well. Worse, you may never know that the other party is behind on payments until you accidentally find out when you pull your credit report or get declined for a loan application.

Unfortunately, while divorce attorneys will help two parties determine how assets are divided, they may not always bring up the issue of how to handle joint debt in a way that truly protects both parties in the case of a future default.

To protect yourself in the event of a divorce, go through all the credit cards you had between you to determine which one carries your name. Be sure to include cards not used for years, which you may have forgotten about. To ensure you include all credit cards in your name, pull your credit report at Free Annual Credit Report, and carefully go through the list of credit accounts on the report.

Any credit card accounts that you and your ex-spouse co-signed are the responsibility of both parties. For cards where you are the main credit cardholder, and your spouse an authorized user, you are the only one responsible for the charges to the card. This is the worst of all worlds, obviously, since your ex has no liability, only charging privileges.

Remove your spouse from credit card accounts he or she is an unauthorized user on, and if possible, cancel credit cards held jointly in both your names. If it’s not possible to cancel the credit card, because there is an outstanding credit card debt on the account, call the credit card issuer and ask them to freeze the account, which will prevent future charges.

It will still not prevent a spouse from defaulting on payments on any outstanding credit card debt, however. In situations where an ex is defaulting on joint debt, you may have no other option than to send in payments in order to protect your credit. When making the divorce agreement, make sure the divorce decree gives you recourse to recoup such payments from your ex, should such a situation arise.

In short, there are multiple disadvantages to taking out a credit card jointly with a spouse or other family member and very few advantages. In these days, when applying for a credit card is easier than ever before, avoid potential future financial headaches by, as much as possible, keeping credit accounts in your own name only.