Credit Card Debt in a New Jersey Divorce
What Happens to Credit Card Debt when You get a Divorce
Like so many Americans, married couples living in New Jersey face increases in costs associated with gas, utilities, mortgages, repairs, childcare, food, and rent. The fact is that these couples do what they must to get through the day, and often, this means living paycheck to paycheck and putting anything and everything else on credit cards.
Many husbands and wives never think about their credit card debt when divorcing in New Jersey. The answer is not always abundantly clear, and litigants are frequently surprised at the answers. If you are contemplating a divorce, about to file, or receive a complaint for divorce, there are things you should know about the allocation and responsibility of your credit card debt.
Many of our clients have experienced or are experiencing what you are going through right now. We advise our clients on how to handle the debt now and as well after the divorce. It is crucial to retain an attorney at the beginning in an effort to avoid the continuous climbing of the debt and the ultimate result of future financial distress. We are here, ready for your call. In the meantime, review how credit card debt may apply to you.
Credit Card Debt Acquired during the Marriage in Cranford, NJ
A credit card that was acquired during the marriage is the responsibility of the married couple jointly. This is true whether the card is solely in your name or held jointly with your spouse. New Jersey is an equitable distribution state, meaning that any assets acquired during the marriage permit each party to be entitled to an equal distribution upon divorce. Similarly, joint debt acquired for the benefit of the marriage or during the marriage is equally shared by one another. Thus, theoretically, any debt accumulated during a marriage should be paid down equally by each spouse.
However, this is not always what happens, and one person is often left to bear the brunt of the debt after the divorce. Such situations occur when the debt is not paid before the conclusion of the divorce and is left to the agreement or understanding that the parties will pay it down afterward. It is essential to understand that creditors are not legally bound by or consider your divorce agreement. In fact, they will come after you to personally pay the entire balance of the debt that was acquired in your name or jointly with your former spouse.
Understanding Joint Responsibility for Credit Card Debt
This is because the joint credit card is the responsibility of both spouses individually or jointly. For example, you and your husband have a credit card with both of your names on it. You agreed that you would transfer the balances of the other credit cards to pay off all of the other cards to obtain a lower interest rate. The debt totaled $10,000 and was not paid off before the divorce, but the marital settlement agreement directs one party to pay $200 a month towards the debt until there is no balance. Your former husband does not pay you as he promised, and now, the creditor comes after you got the entire balance. Are you responsible?
The simple answer is yes. The credit card company is not bound by your divorce agreement and can sue and collect the debt from any cardholder. Unfortunately, you could be stuck paying the entire balance and, after that, suing your ex-husband for the share that he should have paid but did not. Additionally, he likely agreed to indemnify you in the agreement and hold you harmless for any costs and fees associated with reinforcing your agreement. While this may provide some emotional comfort when signing the agreement, the practical application and collection of the amounts through the court is anything but comforting. It is a complex process and one that should be avoided when possible.
Avoiding the pitfalls of unknowingly taking on the credit card debt is more appropriately dealt with by experienced divorce attorneys before the final judgment is entered. The attorney will review such factors as whether the debt was acquired for the benefit of the marriage, was it incurred before the marriage, was it accumulated post-separation, is the debt associated with an affair or is the debt a falsity to lower the overall financial obligation to the other party?
Credit Card Debt Acquired before the Marriage or after Separation in NJ
If the credit card debt was accrued before the marriage or after separation, there is a valid argument that it is not joint marital debt. You should gather as much information and as many credit card statements that present proof that the debt was acquired before or after the marriage was intact. These documents would show precisely what debt was intentionally taken on by your spouse before your marriage and post-separation and that which was not charged for the overall benefit of the marriage and household. If the documentation demonstrates that the debt is not yours, your attorney will argue that you should not be responsible for any repayment or assumption of the debt. The counterargument by the spouse taking on the debt is that he or she should pay less in other ways, such as alimony or other property distribution.
For these reasons, it is essential to stop the revolving charges on your joint or individual credit cards post-separation and during the time leading up to the divorce. Some couples individually cancel common credit cards to eliminate the accumulation of debt in their name. This undoubtedly assists in controlling the extent of growing financial hardships. After the divorce, it may become more challenging to pay the debt down if your debt is more significant than your income.
Paying everyday expenses is not easy, and when you add credit card debt, it can be insurmountable. Some may choose to file bankruptcy before completing the divorce, and others work the debt into their marital settlement agreement. For example, a couple with equity in the marital home may build into their agreement that the credit card debt will be paid upon the sale of the marital home. Others may opt to have one party pay the debt entirely but pay less in allocated support.
Need the Experienced Advice of a Union County Matrimonial Attorney? Call our Linden Offices today
The bottom line is that there are many ways to handle credit card debt in a divorce, and the knowledge and experience of your attorney can make a difference in how it affects your financial health. Before agreeing to anything or assuming that you know what is right regarding your credit cards, contact a matrimonial attorney at The Law Offices of Edward Cooper, Esq. We assist clients with discerning and devising the most appropriate strategy for handling credit card debt and outstanding balances amidst divorce in Westfield, Summit, Rahway, Hillside, Elizabeth, Roselle, and across Union County towns.
Contact us online or call at (908) 481-4625 to schedule a consultation to come to our office in Linden, New Jersey, and talk to Mr. Edward Cooper to go over your concerns and properly guide you and point you in the right direction, and if you do retain us, we’ll work side by side to protect your finances.