Tuesday, November 08, 2005

How will our credit card debt be handled in divorce?

Most everyone knows that divorce involves dividing assets. However, along with assets, debts must be divided. Many couples have credit card debt: either in one party’s name alone or joint credit card debt.

The first step is to gather as much information as possible regarding the debt: account names and numbers, debt balance as of date of separation, name on credit card, recent statements, etc. A credit report can prove to be an excellent resource for this task. Three main credit report agencies provide reports for a fee:

Equifax- (800) 685 1111 - www.equifax.com
Experian (formerly TRW) - (888) 397 3742 - www.experian.com
Trans Union - (800) 888 4213 - www.transunion.com.

You may obtain a credit report on the following website: www.annualcreditreport.com

Generally, in Pennsylvania, marital debt includes any debt incurred during the marriage, regardless of how titled. As with all general rules, there are exceptions and limitations. If you feel that certain debt should not be marital, begin to gather documentation, such as statements documenting what was purchased. As a drastic example, if all of the credit card debt is due to one spouse’ gambling habit, a court may not consider that debt marital and instead ask the spouse who is responsibel for incurring the debt to repay it.

After separation, in order to keep things orderly, it is a good idea to keep non-marital debt separate. Open a new credit card for post-separation spending. Try not to continue using credit cards that still carry marital debt.

If you are able, close joint credit cards at separation. If your spouse if an authorized user on your credit card, investigate whether he or she can be removed. This may save a headache later by keeping post-separation debt separate and giving you peace of mind that your spouse is not racking up debt in your name.

Sometimes couples choose to pay off debt with marital assets in order to provide for a fresh start. Whatever the plan, continue to pay all minimum payments so that your credit is not affected.

1 comment:

Traci said...

Great info! It is important also to remember that regardless of what the court decides regarding debt in a divorce, if a person's name is on a loan and their ex-spouse doesn't make the payments, the lender will come after ALL parties originally on the loan. Lenders have the right to try to collect from all parties who signed the origianl loan application/documents and to report late payments to the credit bureaus. This is yet another reason to check credit reports on an annual basis.