Credit cards—and credit card debt—are a big part of today’s financial landscape. Consider these statistics:
- 82% of Americans have at least one credit card in their name
- 47% of households carry credit card debt month to month
- The average household owes $7,236 in credit card debt
These numbers highlight how commonplace this kind of debt is—but just because it’s common doesn’t mean it isn’t complicated, especially when it comes to divorce.
Divorce requires a careful assessment and distribution of assets and liabilities, meaning that parties must navigate (often tricky and detailed) conversations about who owes what and how this factors into their divorce settlement.
If you’re one of the 270 million Americans with credit card debt—and you’re in the midst of a divorce—here’s what you need to know.
What to consider when it comes to credit card debt and divorce
Credit card debt can be complex, and so can divorce. However, some general insights can help you feel confident about what to expect moving forward.
Certain debts may be considered marital debt
Not all debt in a marriage is “yours” or “mine.” Some debt is classified as marital debt, even if only one spouse’s name is on the account. For example, a credit card used for household expenses or family activities may be treated as marital debt and divided between spouses in a divorce.
On the other hand, debts incurred strictly for personal expenses—such as solo vacations, hobbies, or self-care costs—might be treated differently and assigned to the spouse who incurred the debt. It matters the type of lifestyle that was established during the marriage, and whether these expenses can be considered part of such an established lifestyle or whether they were incurred for “non-marital purposes.”
Division of marital debt is subject to equitable distribution
In New Jersey, an equitable distribution state, marital assets and liabilities are typically divided based on fairness rather than a strict 50/50 split.
If your divorce is decided in court, a judge will consider factors such as the length of the marriage, financial circumstances, contributions to the marital estate, and the nature of any debts, including joint credit cards. They’ll use this information to determine the fairest way to handle credit card balances.
However, negotiating a settlement outside of court can offer a more flexible path that better meets the needs of both parties. For example, one spouse may agree to take on joint credit card debt in exchange for a larger share of retirement assets.
Credit card companies aren’t bound by divorce court orders
While your divorce settlement determines how your assets and liabilities will be divided, credit card companies don’t automatically account for this. Even if the court assigns credit card debt to your ex, creditors can hold you responsible for account activity (or lack thereof) if your name is still on the account.
Why? Because credit card companies operate on contract law, not family law.
To avoid confusion—and potential fees, rate hikes, or damaged credit scores—make sure your settlement spells out how shared liabilities will be managed. If your settlement dictates that your ex will pay a portion of the debt on an individual card, it should also include expectations around when and how the payments will be made and the consequences for not doing so.
You should also make sure any agreements include indemnification language; this helps (but is not a guarantee) against creditors holding you responsible for your ex’s liability.
Closing accounts might not be the right move
While closing joint credit cards during divorce is sometimes recommended to prevent further debt accumulation or misuse of the accounts, it’s not always the appropriate course of action. For example, keeping an account open might be necessary if it’s used for child-related expenses or managing a family business.
It also can have a negative impact on your credit rating, which can hurt you when looking to establish new credit accounts, such as car leases or mortgages.
If you decide to keep a joint account open, your attorney can help you create a clear agreement that outlines obligations and consequences for misuse. This agreement should be incorporated into your divorce settlement to ensure enforceability.
How a divorce attorney can help you navigate challenges regarding credit card debt
Division of credit card debt in divorce doesn’t have to be overwhelming. Here’s how a divorce attorney can help you keep things clear and on track.
Clarifying debt responsibilities
An attorney can help you review your credit card accounts and specific charges and determine who might be responsible for what. Understanding this breakdown allows you to make informed decisions, establish a strong financial foundation, and minimize the balances you carry forward post-divorce.
Negotiating fair terms
Divorce attorneys can lead collaborative discussions about your debt and negotiate a fair division. They’ll work to protect your financial interests, securing terms that are both practical and aligned with your best interests.
Protecting your credit
A strong credit score is a valuable financial asset, and an attorney can help you protect it throughout the divorce process.
Your attorney can help you make decisions that minimize the impact on your credit, such as freezing joint accounts, addressing shared lines of credit, or structuring repayment plans.
Handling surprises
Sometimes, unexpected debt is revealed during the divorce process.
An attorney will guide you through these situations and develop a clear, strategic plan to ensure you’re not held responsible for balances you didn’t know existed. If you’re concerned about hidden balances, they can proactively gather all relevant financial information during discovery. They may even bring in a forensic accountant to uncover undisclosed information.
Providing peace of mind
The value of a trusted divorce attorney goes beyond legal representation. An experienced lawyer is also an advocate who understands the complexities of debt in the divorce process, guiding you step-by-step so you’re well-positioned for a stable financial future after your divorce.
At Jacobs Berger, our team is well-versed in the division of marital property, including credit card debt. Contact us to book a strategy session and start planning for the financial future you deserve.
