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Ex-wife racks up debt on joint accounts

By

To Her Credit
To Her Credit, Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Stewart Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets.
Ask Sally a question, or read her previous answers in the To Her Credit archive
Question for the CreditCards.com expert

Dear To Her Credit,
My sister was divorced seven or eight years ago. Per her divorce agreement, she and her ex were supposed to get new credit in their own names. He did so, but he did not take his name off the other cards. My sister continued to use her card under the joint account, even changing the address to her new apartment, where he never lived.

He went to get a loan and found out that she had defaulted on a card in the amount of $1,800. He is not saying, due to legal reasons I think, how many other cards are out there and the amounts. He has a lawyer and is going to sue her for credit card fraud due to deception, because she had to be receiving cards and bills in both of their names, and just using her own card. He admits to be being stupid for not taking his name off himself, but what she has done is still illegal.

What is her best course of action? She lives in New Jersey. Also, will she be arrested or just served papers to appear in court?

You should also know that she is an alcoholic, has not had a job for over five years, and is being supported by my mother who does not live with her.   -- Sue

Answer for the CreditCards.com expert

Dear Sue,
This is where I tell your ex-brother-in-law -- and everyone else who will listen -- to always close credit cards and other accounts you hold with an ex. Do it the minute the relationship is over. Check to make sure the accounts are closed, and check your credit report at least once a year to make sure it's clean. Prevention is a lot easier than a cure.

Your sister's ex knows that. He also knows he should have caught on long before seven or eight years passed. We all do something stupid one time or another -- this was his turn.

At this point, the injured party could very well take steps against your sister. Pennsylvania attorney Shelli Freeland Eddie says, "Most jurisdictions allow either party to pursue the other's failure to comply with a material term in a divorce decree. These terms are usually found in the Marital Settlement Agreement (MSA), and are addressed through a Motion for Civil Contempt and Other Relief."

Because your sister failed to close the credit card account and/or subsequently ran up more debt in the joint name of both parties, the family court can order your sister to pay "damages" (the amount charged on the card) and close the account. According to Eddie, if she does not do so, she could face additional penalties, possibly including jail, depending on the jurisdiction.

While this is going on between the divorce courts and the parties to the divorce, the creditors still have a contract with both your sister and her ex. The credit card company is not party to the divorce decree.

Eddie says, "The creditor has the legal right to institute a collections action (civil law suit) against both parties to recover any unpaid balances, including the injured ex-spouse. The credit card company cannot be forced to hold harmless a party for failing to pay."

Your sister's ex has little to gain by taking your sister to court, however, and possibly sending her to jail. If she had money, he could sue her for the credit card balances, his attorney fees and possibly even damages for injury to his credit score. He can hurt her, but at great expense to himself. He has nothing to gain from suing an unemployed alcoholic, except perhaps to satisfy spite.

The ex may be better off paying the balance or negotiating a settlement. "In my family law practice experience, I have been able to negotiate a reduced payment obligation on the part of the injured ex-spouse, along with a subsequent agreement to remove that spouse from the account," says Eddie. Of course, any balance negotiation will affect his credit score.

From your sister's perspective, her best course of action is to cooperate with her ex. She should immediately close all joint accounts so no more can be charged on them. She may be able to allay some of his anger and avoid the possibility of being taken to court by promising to make good on the $1,800 credit card bill as soon as she can.

Perhaps this crisis is the wake-up call your sister needed. She can't live off Mom's money forever. It's time for her to get help with her alcoholism. Only when she's on the road to recovery can she take control of the rest of her life, including her career and finances.

See related: 7 big post-divorce money mistakes

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"Opening Credits"

Published: November 1, 2013



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