One of the first casualties of divorce is often a person's finances. As couples divide their households, their credit card bills can fall through the cracks, resulting in costly late fees and interest charges as well as ruined credit histories. In addition, the legal costs associated with divorces can result in considerable credit card debt for one or both of the parties.
But it doesn't have to be this way. By understanding the responsibilities of credit card holders, both parties can continue to maintain their good credit thorough the divorce process.
How Credit Card Debt Is Handled in the Event of Divorce
While married, individuals may be either the primary cardholder or an authorized cardholder on their spouse's account. While the primary account holder is always responsible for repayment, an authorized cardholder can make charges that they are not obligated to repay. So in many cases, the spouse who is the primary cardholder is saddled with debts of their ex, who is just an authorized cardholder. Yet in states that have community property laws, both spouses are responsible for repayment, not just the one who is the primary cardholder. The laws on this will vary by state, so check with your attorney.
In some cases, couples may have opened credit card accounts as joint account holders, which means that both parties are equally responsible for repayment. So if neither person pays the bill, both will be responsible for late fees and interest charges, and this negative information will be added to the credit reports of both individuals. Furthermore, a divorce decree dos not affect each person's responsibility to pay debts incurred by a joint account.
What You Need to Do with Your Credit Cards in the Event of Divorce
Even before your divorce is finalized, you will need to separate your credit card accounts from each other to avoid being responsible for your ex's debt. So, the first thing that you should do is cancel any authorized users on your account to ensure that you will only be responsible for your own charges. In addition, you should close any accounts where you are a joint cardholder so that you two aren't bound by debt, even after you are no longer bound by marriage.
Next, you will want to take an inventory of all the outstanding credit card debts that you have as a primary or joint account holder, update your mailing address with each account, and ensure that you are making at least the minimum monthly payment every month. Just to be safe, it's best to double check your credit report to ensure that there are no accounts that were opened in your name that you weren't aware of. For now, it's crucial to maintain your accounts in good standing, and use your divorce proceedings to pursue anything you feel you are owed by your former spouse.
Paying Off Your Divorce Credit Card Debt
Once you have a good idea of which accounts you have that you must repay, you should create a plan to do so. If you haven't missed any payments, and your credit score is still high, then you should consider a credit card with a 0 percent APR balance transfer offer. These cards allow you to pay off your existing debt by transferring it to a new account with an interest free promotional financing period. The best offers can feature 15 months or more of 0 percent APR financing on both new purchases and balance transfers, and nearly all have a 3 percent balance transfer fee. The exception is the Slate card from Chase, which features 15 months of interest free financing on new purchases and balance transfers, with no balance transfer fee. This will give you some breathing room to avoid interest charges and maintain your good credit while you finalize your divorce.
Divorce can be an incredible emotional and legal challenge, and it may also put enormous stress on your personal finances. By paying attention to your credit cards, and maintaining each account, you can emerge from your divorce proceedings with the best credit score possible.
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