California is a community property state. Because of this, many people often wonder what happens to their credit card debt after they divorce. As with assets, there are two types of credit card debt which must be assessed in the divorce process, namely solely held debt, and jointly held debt.
Any credit card which a person had prior to their marriage is considered sole property. All new balances are their responsibility with one possible exception: If a spouse opts to obtain a second card — an authorized user card — in the other spouse’s name, the spouse making the charges may be held responsible for the debt which the authorized user incurred after the date the couple legally separated.
This works differently for credit cards, which only one spouse applies for and the other has no authorized user status in California. In states where there are no community property laws, spouses may apply for credit cards only in their name. They alone have the responsibility for ensuring the monthly bills are paid on time, and the account is reported properly on their credit report. There are some significant differences in how credit cards are handled in community property states.
When couples take on debt in a community property state, both people are responsible for the debt. This means even if a credit card has only one signatory and the application was filed by only one person, both are taking on the liability for ensuring the bills are paid on time. Should one spouse fail to make regular payments, it could impact the credit of the other partner since they are equally responsible for repayment of the debt.
When a couple is divorcing in a community property state, the assets of the marital estate are divided between the two parties. The same is generally true for debts. However, some exceptions may apply when it comes to credit card debt, as follows:
Another issue which confuses many is credit card debt which is incurred by either spouse after the date they have legally stopped living with each other. In California, this does not apply. Debts which are incurred on a credit card until the date the divorce becomes final are still the responsibility of both parties. There may be exceptions to this which must be backed by documentation. For example:
Credit card debt which is only in your name but ordered to be paid by your former spouse is problematic if they fail to make payments. After all, this will impact your credit score. The same is true for credit cards which are held in both your names. There are some potential options to ensure you will not be liable for credit card debt which your spouse is ordered to pay as part of your divorce agreement. These may include:
Dealing with credit card debt during a divorce is not easy. If you need help with your California divorce, or if you need help with credit card debt information during your divorce, contact The Law Offices of Steven M. Bishop, Attorney at Law, at (619) 299-9780 or contact us online.
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