If you are getting a divorce, the extent of your liability for credit card debt depends on:
- whether you live in a common law or community property state
- whether the debt is for a joint credit card, and
- who the debt is assigned to in the divorce.
(For more information on credit card debt, see Dealing With High Credit Card Debt.)
Credit Card Liability in Common Law States
The majority of states follow the common law rules when dividing property and debt in a divorce. These are referred to as common law states. In a common law state, you are generally liable for all debts in your name. This means that if you took out a credit card in your name or if you cosigned on it, then the creditor can come after you to collect the debt.
As a result, after divorce, you can be held liable for all individual or joint credit cards as long as your name is on them. However, in most cases, you are not liable for any credit card debt owed solely by your spouse.
Special Rules for Community Property States
When it comes to property distribution and debt allocation, certain states follow community property laws rather than the common law. In a community property state, most debts incurred by either spouse during the marriage (but not before or after marriage) are considered community debts. Both spouses are held equally liable for community debts even if only one spouse incurred the debt.
This means that, if you live in a community property state, you may be on the hook for a credit card even if it is in your spouse’s name only. However, each state also considers different factors when determining if an obligation is a community debt. Generally, if the credit card was used for something that benefited the marital community, it will be community debt regardless of who incurred the charges. But if your spouse used his or her own credit card to buy something that did not benefit your marriage, there is a greater chance it will not be considered a community debt.
Currently, community property states include Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, married couples have the option to make their property community property by agreement.
What Happens If the Debt Was Assigned to You or Your Spouse in the Divorce?
The first thing to note is that credit card companies are not bound by the terms of your divorce decree or a family court order assigning the debt to you or your spouse. This is because when you obtained the credit card, you entered into a contract with the credit card company. A family court judge does not have the power to alter the credit card company’s rights under the contract.
As a result, even if a debt was assigned to your spouse in the divorce, you will still be liable for it if your name was on the account, you were a cosigner, or it was a community debt (although it is less likely that a credit card company will pursue you based solely on community debt liability if it was your spouse’s card).
However, if your spouse is ordered to pay a credit card in your divorce but fails to do so, he or she will be in violation of the divorce decree or court order. In that case, you will usually be entitled to reimbursement or damages from your ex-spouse if you end up having to pay the debt.
What If Your Spouse Files for Bankruptcy After Divorce?
If your spouse files for bankruptcy after your divorce, his or her liability to the credit card company will be discharged. This means that if you were jointly liable on a credit card, you are now the only one on the hook.
However, if a debt was assigned to your spouse in your divorce and he or she agreed to (or was ordered to) hold you harmless for that debt, his or her liability towards you is not discharged in bankruptcy. As a result, if your spouse doesn’t pay the debt and you suffer damages, you have grounds to sue him or her even if the credit card company can’t.
Learn more about what happens to credit card debt in bankruptcy.