Your credit card agreement trumps your divorce decree
If card agreement says you're responsible for card debt, you're likely stuck with it
Kim McGrigg is Community Manager for Money Management International, where she provides personal finance education information to consumers.
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Dear Credit Care,
My husband and I are divorcing, and he has abandoned our family.
In our divorce decree, it states that he will assume all marital debt. I faxed
over the agreement plus a letter explaining such. Will that exempt me from
responsibility? Are there any steps I need to take to protect me and my
children's future? My husband is claiming bankruptcy. Should I also be doing
this? -- Jodi
Your divorce decree is a legal, binding document. However, if you
signed a credit card agreement or loan document stating you were financially
responsible, then you are financially responsible no matter what your divorce
decree may state.
For example, you and your husband may have joint credit card
accounts where you are both financially responsible for the accounts, and your
divorce decree may state that your husband is responsible for paying the
balances of the accounts. The cardholder agreement that you signed as a
financially responsible party is the only thing that the card issuer will take
into account. Your divorce decree does not legally amend the existing agreement
with your creditors. That means if your husband does not pay as your divorce decree states, the card issuer will likely look to you for payment. The
existing cardholder agreement trumps the divorce decree and you would be
legally responsible to pay.
So, it is a good idea when divorcing to try and eliminate all
joint debt, if possible. What many couples do is open new separate credit card
accounts in each person's name only and transfer joint account balances as
agreed in the divorce settlement and then close the joint accounts. For joint home
mortgages and car loans, it is best for both spouses to sell the items or
refinance into only one spouse's name only, but that is not always possible. In
order to protect your credit and your finances, you will need to be sure that
any joint accounts are paid and closed, refinanced into your ex-husband's name
only or paid by you.
In your letter, you state that your husband is filing bankruptcy.
If he is planning to include in the bankruptcy joint accounts that were
assigned to him for payment in the divorce decree, those creditors will likely seek
payment from you as the other financially responsible party. Should you be
unable or unwilling to pay those accounts, I recommend you consult with an
attorney to determine your best course of action. It could be that filing for
bankruptcy may be in your best interest as well. But because your credit score
takes many years to recover from a bankruptcy, you will want to explore all
your options before taking that step.
Getting back to your divorce decree, you can take your ex-husband
back to court if he is not abiding by the terms of the divorce. In failing to
do so, he would be considered in contempt of a court order. Keep in mind that
you can request that the judge include your attorney fees and court costs when
compelling your ex-husband to pay what he owes. Of course, should your
ex-husband file for bankruptcy and be able to show the court he is unable to
pay, taking him to court may be a futile effort.
Handle your credit with care!
See related: Credit card help: Credit scores and credit reports, Will filing bankruptcy hurt ex-spouse?, 6 financial mistakes to avoid in divorce, Credit card agreements are largely unreadable
Kim McGrigg is the community manager for Money Management International, the largest nonprofit, full-service credit counseling agency in the United States. You can find more money management advice on Blogging for Change and MMI's Facebook page.
Credit Care answers a question about a debt or credit issue from a CreditCards.com reader each week.
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Published: August 29, 2011