who's responsible for the credit card?

August 4, 2008 8:23 PM

Sadly, I'm likely to be going through a divorce in the near term. I have a concern about the credit card debt I've accumulated and wish to protect my wife from any liability. Should I find myself in a situation where I am unable to pay it [ lose my job, injury, death ], is there a way to insulate her from the debt before our divorce? Does she have any liability after the divorce?
posted by glawky to law & government (7 comments total)

I had a similar concern while going through my divorce. We spoke to our divorce attorney and had it written into the divorce document. While she said that it's not 100% protection, it should serve to protect my ex from most of my debt. Talk to your lawyer!
posted by The Light Fantastic at 8:41 PM on August 4

I believe this depends on whether the debt is in your name alone or in joint accounts.

Here are some resources:

Expert Law
DivorceNet

This is intended for women, but I think the information is useful
posted by FlamingBore at 8:42 PM on August 4

Here are some resources on the disposition of debt after divorce. It seems to depend on whether they are joint or individual accounts and whether you live in a community property state. Your lawyers should be able to help you work these issues out.

FTC resource

Information for separating parents (I think the advice is mainly the same whether you have kids or not)

If you do divorce, if you can transfer any joint or community property debts to individual accounts solely in your name after you are legally divorced, it appears to me that there is no way your then ex-wife could be legally accountable for these debts. If there is joint debt you cannot dispose of, you might want to look into life insurance and disability insurance. Many credit cards offer optional insurance that may also offer cover job loss, but most independent resources say it's a bad deal.
posted by nanojath at 8:52 PM on August 4

What state are you in? This is yet another question with a state-specific answer. Here are some considerations-- did you incur all the debt after marriage, or some beforehand? Do you live in a community property state and if so, does it also recognize the concept of community debt? It may or may not make any difference whether your wife is also principally liable on the credit card debt-- in some states, like Texas, any debt you incur after marriage is presumptively community debt.

Because here's the kicker-- if your state is one of those where a creditor can look to either spouse to collect on a debt incurred during marriage, it doesn't make one damn bit of difference what the judge orders in a divorce decree (or whatever it's called in your state)-- unless the creditor is a party to the divorce action (which ain't going to happen), it is not bound by the terms of the decree. The decree can only order who pays the debt as between the two of you-- it has no jurisdiction over the creditor. I'm emphasizing the language above because it's a concept most lay people have real difficulty wrapping their minds around.

If the creditor can look to your wife to pay the debt, then she will have some recourse-- against you. The mechanism will vary depending on the terms of the decree and whether the debt is even mentioned there. The problem with that recourse is that, if you were in a position to pay her, you'd have been in a position to pay the debt yourself.

Any creditor will look to any possible party to pay a debt-- and in this climate, they may not be bothered by little niceties like whether the third party is legally liable. That's one reason skip tracers like to call parents of debtors.

By all means, ask your lawyer what the law is in your state.
posted by missouri_lawyer at 9:48 PM on August 4 [1 favorite]

As missouri lawyer says, assume your creditors will come after whichever you is richer. If your ex is left debt-free by your intended plan, this may very well be her.

You may be able to circumvent this in several ways, some of which may be dodgy and all of which should be discussed with a credit counselor in your area (one who works directly for a charity, not for a finance company, even on behalf of a charity). One possible solution is a consolidation loan in your name only, paying off all of the dual-name debts with it.

Another solution, if you can trust her, is for your soon-to-be ex-wife to make the actual payments with money supplied by you; that is, whenever they demand money from her, you give her cash and she pays up, while you ignore demands made to you - thus making it look like she's being good and preserving her credit as much as possible, but sadly, doing so at the expense of yours.

Or you can come to some arrangement with your mutually-owned property, such that she is left with $X worth more than you, where $X includes "her share" of the mutual debt, sufficient to cover the interest for the expected term, and also whatever you both consider is fair to compensate her for the trouble of taking on part of your debt.
posted by aeschenkarnos at 10:59 PM on August 4

I wonder if this credit card debt situation would submit to a Gordian-knot type solution:

Sure, write the responsibility into the divorce document and otherwise work to protect her during the legal proceedings. Then, when the divorce is final, open a new credit account and get a balance transfer of all existing credit accounts you wish to take on responsibility for. Then close all the credit accounts that were opened while you were married.

I would think that this would effectively close any legal path your creditors would take towards your wife. The old accounts are all settled and the new debt is all yours as a single man. Of course, I am not a lawyer. Ask yours if this simple solution would suffice.
posted by BigLankyBastard at 6:50 AM on August 5

Thanks for all the good insight. I am in Massachusetts and am ignorant as to whether it is a community property state. All the debt was incurred while we were married.

I have a good job and fully intend to pay off the debt, but things happen and I simple want to protect her, if I can.
posted by glawky at 10:49 AM on August 5