Will bankruptcy wipe out credit card debt assigned to me in a divorce?
Whether you can wipe out credit card debt assigned to you in a divorce depends on whether you file for Chapter 7 or Chapter 13 bankruptcy.
I recently got divorced. According to the divorce decree, I am responsible for paying a joint credit card I had with my ex. If I file for bankruptcy, will I still have to pay this debt?
If your divorce decree requires you to pay a joint credit card you have with your ex, whether you can discharge (eliminate) that obligation in bankruptcy depends on whether you file for Chapter 7 or Chapter 13 bankruptcy. Read on to learn more about whether filing for bankruptcy can help you wipe out credit card obligations assigned to you in a divorce proceeding.
For more information on filing for bankruptcy after a divorce, see our topic area on Divorce and Bankruptcy.
Your Divorce Decree Creates an Obligation to Your Ex-Spouse
If you and your ex-spouse have a joint credit card, you are both contractually responsible for paying back that debt. If a family court judge orders you to pay that joint credit card in your divorce decree, it doesn’t eliminate your ex-spouse’s liability for the debt. But it typically imposes an obligation on you to indemnify your ex from any harm he or she might suffer as a result of your failure to pay. This is usually referred to as a “hold harmless” provision.
If you have a hold harmless provision in your divorce decree that requires you to pay your joint credit card, you have an obligation to both your ex-spouse and the credit card company to pay that debt. While both Chapter 7 and Chapter 13 bankruptcy will wipe out your liability to the credit card company, whether you can eliminate your obligation to your ex depends on the type of bankruptcy you file (discussed below).
Chapter 7 Bankruptcy Will Not Eliminate Your Obligation to Your Ex-Spouse
Filing for Chapter 7 bankruptcy doesn’t wipe out all types of debt. Obligations you can’t eliminate in bankruptcy are called nondischargeable debts. Debts to your former spouse incurred in connection with divorce or separation proceedings are not dischargeable in Chapter 7 bankruptcy.
This means that while filing for Chapter 7 bankruptcy can discharge your liability to the credit card company, it will not eliminate your obligation to your ex. If the credit card company goes after your ex because you fail to pay the debt, he or she can seek damages against you for violating the divorce decree.
To learn more about debts you can’t discharge in Chapter 7 bankruptcy, see Nondischargeable Debts in Chapter 7 Bankruptcy.
Chapter 13 Bankruptcy Can Help
Certain debts (such as alimony and child support) are not dischargeable in either Chapter 7 or Chapter 13 bankruptcy. But there are some debts you can discharge in Chapter 13 bankruptcy that you can’t eliminate in a Chapter 7. Marital obligations you incur during divorce or separation proceedings (as long as they are not characterized as support payments) are one of those debts. (To learn more, see Debts Discharged in Chapter 13 But Not in Chapter 7).
This means that if you successfully complete your Chapter 13 repayment plan and obtain a discharge, you can typically eliminate your obligation to both your ex-spouse and the credit card company for your joint credit card debt. But keep in mind that if the court classifies the debt as a form of support obligation (rather than a property settlement), it can’t be discharged in Chapter 7 or Chapter 13 bankruptcy.
For more information on how you can reorganize your debts in Chapter 13 bankruptcy, see our Chapter 13 Bankruptcy topic area.