Will my husband's business card debt hurt my credit after divorce?
Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.
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Dear Your Business Credit,
I am going
through a divorce and live separately from my husband. He uses credit cards for
his business. Some of the cards are in his name alone, and the bills go to his
new address. I'm worried that it will hurt my credit if he doesn't pay the
bills on time. Is there anything I can do to make sure he does not ruin my
I am sorry
to hear what you are going through.
You have plenty of company in tackling issues like this, according to Kurt Olender,
managing partner at OlenderFeldman
LLP in Union, N.J., where he specializes in corporate law. "They arise in a husband
and wife context and with partners," says Olender. When two people part ways
after taking out credit cards or other obligations together, these agreements
have to be unwound.
that your liability for your husband's debts depends, to some degree, on the
laws of your state.
New Jersey, for
instance, is among the majority of states that follow an "equitable distribution" scheme that
says marital assets and liabilities should be divided fairly, though not always
equally, in a divorce. If you live in such a state, you could try to protect
yourself by asserting, through your attorney, that it would
not be equitable to distribute the debts of the business to you, advises Olender.
If, however, you have benefited in a material way from the business -- by for
instance, living in a house that your husband's business income paid for -- that
fact would weaken your claim, he says.
Nine states -- Arizona, California, Idaho, Louisiana, Nevada, New
Mexico, Texas, Washington and Wisconsin -- are "community property"
states, meaning that property or debts accumulated by either partner during a
marriage belong to both partners and would be divided evenly if the marriage
ends. (Alaska is an opt-in community property state.
that you and your husband have signed with the credit card companies will also
determine your liability for your husband's debts. "The credit card company
would generally go after the signatory of the agreement, with respect to any
wrongdoing or expenditures," Olender says.
been married a long time and comingled all your finances, you may not
remember who signed for each card. In that case, calling the card companies may
help sort things out.
husband filled it out and signed his name to it, then it's only he personally
that is liable to the credit card company, vis-a-vis the obligations of the card,"
give you total protection, he adds. If your husband defaults on one of his
credit card debts and the issuer wins a judgment against him, it could go after
your joint assets, like your house or a joint savings account, Olender says.
The best way
to protect your assets from a future judgment against your husband is to make
sure they're in your name only and your funds are separated from your husband's,
you're a signer on the account? As long as the balance is zero, credit card
companies will often let you close it and allow your spouse to open a new
account, according to Olender. (If there's a balance, you'll probably have to make
arrangements with your husband to pay it down before you can take your name off of the account).
You can gain
some measure of protection by writing a letter to each credit card issuer,
telling them that you are no longer living with your spouse and will not be
responsible for his debts, says David Grigolla, a family law attorney based in
Glendora, Calif. It doesn't matter if you have filed a legal separation or not,
Make sure to
read the agreements you have signed with the credit card issuers, which could
also affect your liability, Grigolla says. Card issuers' rules sometimes assert that the laws of the state where the company is headquartered prevail. "Even though I may be in California,
they often follow the state law of Delaware or wherever the main corporation
is," he says.
sounds like a big job, it is. To avoid making a mistake, get some guidance from
a lawyer who knows the laws of your state. Hiring one is not cheap, but it
could save you a bundle in the long run.
See related: Dividing credit card debt in divorce, Your credit card agreement trumps your divorce decree, Liability can be fuzzy on old debt
Elaine Pofeldt is a journalist who specializes in entrepreneurship and careers, contributing to publications such as Fortune, Money, Working Mother and many others. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of 200kfreelancer.com, a website for independent professionals.
Elaine answers a question about small business and credit from a CreditCards.com reader each week.
Send your question to Your Business Credit.
Published: April 22, 2013
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