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How credit card debt affects divorce

Finding out that a spouse has run up credit card debt is a difficult discovery. However, this discovery may hurt even more when spouses are going through the divorce process. Each state has its own rules regarding debt division, including equitable division and community property division. Illinois is an equitable division state.

In community property states, creditors are typically able to pursue a spouse for debt that is considered to be community debt. This spouse is presumed to be financially liable for the debt unless he or she can show that he or she should not be. Evidence may include showing that the spouse was not aware of the debt and that he or she did not benefit from it. In equitable division states like Illinois, a spouse is not typically liable for his or her spouse’s credit card debt if the spouse is only an authorized user on the account and not an actual account holder.

The judge will stipulate which assets and liabilities belong to each spouse in the divorce decree. Judges can take other factors into consideration when distributing assets and liabilities, such as whether there are any extraordinary expenses or recent property transfers. The debts may be required to be paid off as a provision in the divorce settlement. However, a divorce court does not have jurisdiction over existing contracts and creditors do not have to honor the provisions in the decree. Creditors may go after both parties to collect on the debt.

Spouses can protect themselves by making detailed lists of their accounts along with their existing statuses. Checking a credit report can alert spouses to any unknown debts. A spouse can also notify accounts of a pending divorce and close the accounts.

Spouses in Illinois who are divorcing often consult with independent legal counsel from family law attorneys to learn about their rights and options. Divorce attorneys may also be able to provide vital information regarding property, assets and debts.

Source: Fox Business, “Is Wife Liable for Ex’s Card Debt?“, Sally Herigstad, May 07, 2013