The Financial Ramifications of Divorce – Part I

Everyone recognizes the emotional distress caused by divorce, but what about the financial ramifications? This two-part series will address several possible financial scenarios after couples split up, and how to ensure that you handle each situation appropriately. Today we will talk about joint credit card debt, and who walks away with the associated liabilities after separation.

Sometimes, in divorce proceedings, credit card debts are not given enough attention due to more pressing financial issues, such as child support calculations and dividing retirement accounts. At Veitengruber Law  we trongly advise our clients to enter into their newly single lives with no joint debt, due to the possibility of the other party filing for bankruptcy or simply not paying his or her due portion.

Credit card companies do not have to abide by divorce decrees, so if your ex-spouse doesn’t live up to his end of the agreement, creditors will ultimately end up chasing you for the amount due plus any late fees. In order to avoid this potentially disastrous situation, make every attempt to pay off any joint credit card debt before you are handed your divorce decree.  If paying it off in a lump sum isn’t possible, divide up the total amount onto separate cards in each party’s name, and make sure that the joint account gets cancelled.

In the event that your divorce is already finalized and nothing about credit card debt was put onto the court record, there is a distinct possibility that your ex-spouse will continue to use the card(s) – ultimately ruining your credit along with his.

If your split was not amicable, things can get ugly if joint accounts remain. Some couples end up in a game of spite, charging more and more items onto joint cards just because the other party did the same thing. In cases like this, you may find yourself drowning in debt and wondering if you should file for bankruptcy.

In today’s society, filing for bankruptcy does not carry the disastrous stigma it did 50 years ago. It’s not an ideal situation, but it can be a necessary solution for some newly single people who have no way to pay off debts that were incurred while married. It’s important that you stop charging anything and resolve to buy only what you can afford with the money you make.

Seek out a qualified attorney to help you determine if you can set up a payment plan with your creditors or if you do, in fact, need to file for bankruptcy. Naturally, this should be your last resort, and all other avenues to resolve your debts should be explored first. Once you declare bankruptcy, you can’t do it again for eight years, so you’ll need a professional to tell you when it’s really time to use your trump card.

Next week we’ll talk about keeping your house….without your spouse.

*Above photo courtesy of Meddy Garnet

8 Responses to The Financial Ramifications of Divorce – Part I

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