Spouses typically share their resources and their financial obligations with one another. Much of the divorce process focuses on resolving economic matters so that they can live separately again.
Spouses have to divide their property. They also have to find solutions for splitting up the financial responsibility for their various debts. Revolving lines of credit, such as credit cards, are often a complicating factor in modern divorces.
Credit cards are useful financial tools that help people maintain the flexibility necessary to cover unexpected and variable household costs. They can also be a source of economic pressure during a marriage and a source of conflict during a divorce. What typically happens with credit cards during divorce proceedings?
Closing accounts often happens early
It is common to freeze joint credit cards early in the divorce process. Doing so helps avoid situations where one spouse dissipates marital property. Accounts held jointly in the names of both spouses may be subject to closure, although the spouses still need to address the amount owed on the account.
The balance due on shared credit cards and even separate credit cards held by either spouse can influence the overall property division process. Most debts taken on during the marriage are subject to division, regardless of whose name is actually on the card.
Spouses have to negotiate a way to allocate their financial obligations just as they need to divide their marital assets. Sometimes the spouses can each take responsibility for certain accounts. Other times, the spouse with more property and higher income may take a greater share of the marital debt in the divorce. The spouses can also use their assets to pay off marital debts so that neither spouse has to carry those obligations forward after the divorce.
Credit cards can be a source of contention, especially if one spouse has already engaged in questionable spending. Dissipation or wasteful spending leading up to a divorce filing and resources spent while conducting an extramarital affair can potentially complicate the process of identifying marital debts and reasonably allocating them between the spouses.
Identifying potential sources of property division disputes can help people set clear, achievable priorities as they prepare for divorce. Credit cards can easily cause arguments and may require a thorough financial review to ensure a reasonable divorce settlement outcome overall.