Joint Credit Cards, Divorce, and Bankruptcy

In marriage, “two become one.” It is a beautiful sentiment that also has legal implications. Married couples often enjoy better legal protections than unmarried people. However, when a couple obtains unsecured credit together, like in the case of joint credit cards, the legal status of the marriage does not offer any unique protections.

A joint credit card is generally a bad idea. If there is a default on a joint credit card, the credit card company can pursue either individual or joint assets. The company can sue both husband and wife, and can collect from property owed by the husband and/or wife. On the other hand, if the credit card is just in the husband’s name, the bank cannot get at property that is not in his name – and vice-versa for the wife.

During a divorce the family law court will divide marital debts and order the individual parties to pay an assigned share of the debts. For instance, a family court may order husband to pay a joint credit card debt. If the husband fails to pay the joint credit card debt, the family court can hold him in contempt of court, which can include money sanctions or even jail until he complies with the order. In many cases the court can order the defaulting party to pay a kind of restitution to the other party (often called a “hold harmless” clause in the divorce action).

While the family court has the power to direct the divorcing couple to pay an unsecured credit card, it does not have the power to alter the original credit agreement with the credit card company. The family court order does not apply to the credit card company because the card company was not party to the divorce proceedings. This joint contract is still fully enforceable, and if the debt is not paid as agreed, the card company can collect 100% of the debt from either or both parties.

Default on a joint credit card debt after divorce may lead to bankruptcy. Discharge of a marital debt is tricky and requires the assistance of an experienced bankruptcy attorney. In basic terms, one party can discharge a joint credit card debt if the debt is not “in the nature of support.” Credit card debts are not generally viewed as support obligations, so the next inquiry is whether there is a hold harmless clause in the divorce decree. If so, the credit card debt could be determined non-dischargeable during a Chapter 7 bankruptcy case, but can be discharged in a Chapter 13 case.

Discharging joint credit card debt after a divorce can get complicated and can lead to litigation with your ex-spouse during your bankruptcy case. The best advice is to have the matter fully examined by an experienced bankruptcy attorney before filing. Your attorney can assess your situation and give you a legal opinion as the dischargeability of the debt.

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