What Happens to Credit Card Debt When a Couple Divorces?

A spouse’s high credit card balance may be partially your responsibility in a New York divorce. Equitable distribution applies equally to asset and debt divisions.

New York is an equitable distribution state, meaning assets and debts are split equitably between divorcing spouses. This split is not necessarily equal.

Even in cases where a credit card is only in the name of one spouse, both parties are generally deemed responsible.

What Is Marital Debt?

Marital debts follow the same guidelines as marital assets. Whatever is acquired or encumbered during a marriage is generally considered part of the marital estate and subject to division. In New York, judges divide debt, like assets, on a case-by-case basis. The court examines the totality of the situation before making a determination. The income and assets of each spouse, who benefitted, and other considerations are evaluated by the judge.

Depending on the circumstances, marital debt can include any of the following:

  • Credit card debt
  • Student loans
  • Vehicle loans
  • Mortgages
  • Medical bills
  • Home equity loans
  • Lines of credit
  • Signature loans
  • Tax liabilities

How a debt is characterized (separate or marital) is completed with the help of an experienced divorce attorney through litigation or negotiation.

What Is Separate Debt?

Debt is generally considered separate and not marital if the obligation was taken on before the marriage or after the date of separation. All the above-bulleted items could be categorized as separate debt, too, depending on all the circumstances. Separate debt is typically not subject to division in a divorce unless doing so provides for a fairer outcome.

Debts acquired during a marriage can still be classified as separate in specific scenarios:

  • A spouse incurred a debt to carry out an extramarital affair
  • A spouse incurred a debt in secret for their spouse

Separate Debt Can Become Marital Debt

What was once a separate debt can become marital debt when it is treated as a marital obligation. For example, if a couple consolidates separate credit card balances into a separate single loan, that separate debt would become marital.

Dividing Debt Outside of Court

The vast majority of divorces in New York never go to trial. The terms – child custody, child support, property and debt division, and spousal maintenance – are negotiated outside the courtroom. With the help of attorneys, the two parties work through every aspect of their agreement. One person may take on greater responsibility for the marital debt in exchange for not paying spousal maintenance. One person may take on more doubt in exchange for possession of the marital home. The end agreement can creatively meet the legal requirements and personal needs of everyone involved.

When spouses reach an accord, the court is involved only to review the agreement and issue a final judgment. Judges can invalidate the agreement if they believe there is fraud or grossly unfair. This is rare and typically avoided when the parties are represented by legal counsel.

Experience Makes a Difference in Marital Settlement Agreements

A marital settlement agreement does more than wrap up a marriage. This contract is critical to creating the right environment to restart life unmarried.

Dividing debts and assets is a complex process. Without the proper guidance, you increase the chance of unfairly burdening yourself with too much debt and too few assets.

Learn more about your rights in a divorce agreement. Schedule a consultation with one of our experienced attorneys by calling (516) 584-4685 or contacting us online.