Credit Card Debt and Divorce
Credit Card Debt and Divorce Attorney Monmouth and Ocean County NJ
If you are considering divorce or separation, pay special attention to the status of your credit accounts.
Just as assets are shared in marriage, so is debt. A joint account for a credit card is the responsibility of both spouses. If you are considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it’s important to make regular payments so your credit record won’t suffer. As long as there is an outstanding balance on a joint account, you and your spouse are responsible for it.
If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user or ask the creditor to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital status but can do so at either spouse’s request. A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit.
What Is the Status of New Jersey Law concerning Equitable Distribution Related to Credit Card Debt?
There is a presumption that there is a 50-50 split of any marital debt in New Jersey. Any marital debt is divided as part of any property settlement agreement. Equitable distribution requires a consideration of marital debts as well as marital assets. Generally speaking, the court must take into account the liabilities and the assets of the parties in dividing marital assets. There are many cases in which there are no marital assets but only marital debts, which must nevertheless be allocated for equitable distribution purposes.
The key New Jersey case regarding the apportionment of marital debt is Monte v. Monte, 212 N.J. Super. 557 (App. Div. 1986). Here, the court held that the allocation of debt depends upon the circumstances in each particular case. In summary, any credit card debt that is related to supporting the family is considered marital debt. If the credit card debt is related to such extracurricular activities such as gambling, massages, or on vacation trips, the court will not apportion this debt to the other spouse. The key issue is whether credit card debt is related to supporting the family. If so, then both spouses will be held jointly responsible for these credit card debts even if only one spouse incurs the charges.
How Should I Handle Joint Credit Card Debt During Legal Separation?
To close joint credit cards, you must formally write the creditors and notify them of the impending divorce and request that the credit card account be closed and that the credit cards be canceled. Additionally, you should also ask the credit card company to provide a current statement of account and make them aware of the fact that you do not intend to be held liable for any and all debt accumulated after the date of the written letter. It is wise to send these letters by certified mail to retain the creditors’ proof of receipt. In some instances, the creditor will ask that the outstanding balance on an account be paid in full. If it is possible to comply with this, then do so. If not, at the very least, have them place the account on inactive status so that no new additional charges may be added and stipulate that once the balance is paid in full, the account is to be closed completely.
If One Spouse Files For Bankruptcy, What Happens To The Debt?
If one spouse files for bankruptcy and the other spouse does not, then the credit card company will pursue the active debtor for the full amount owed. When you sign up for a credit card, the spouses usually sign a contract that requires both parties to be jointly and separately liable. This means that if one spouse should die or files for bankruptcy, then the other spouse is liable for the entire credit card debt. The credit card companies do not care whether it is fair to collect the credit card debt from you or from your ex-spouse, even though your ex-spouse racked up the charges. The credit company is possessed with only one objective, and that is to collect money. They will destroy your credit, lien up your home, and garnish your paycheck to achieve their goals.
In any divorce case, the equitable distribution of credit card debts must be handled with extreme attention to detail. One should never assume that his/her soon to be ex-spouse will pay their credit card debt(s) that are delineated in their divorce judgment. Any property settlement agreement should have provisions that address what will happen to the apportionment of credit card debts if one spouse files for bankruptcy. The easiest way to confront this issue is to pay as much of the debt as possible through the marital assets’ sale.
Contact A Brick, NJ Debt and Divorce Attorney
At Bronzino Law Firm, our team has the knowledge and know-how to help you reach a fair settlement in your divorce. Debt division and divorce attorney Peter J. Bronzino is available to answer all of your questions regarding divorce and debt or other financial aspects of divorce. Call us at (732) 812-3102, contact us online or visit us in our Sea Girt or Brick offices.