A credit card balance may become a significant financial burden when spouses divorce, especially if neither spouse has adequate resources to pay the debt. In New York, the court may assign responsibility for credit card debts as part of a divorce judgment, or the spouses may voluntarily agree on who will pay the debts. In either situation, you should understand the rights established by New York divorce laws and federal debt laws. Accordingly, you may choose to seek professional help.
Distribution of Debts in Divorce
New York state divorce laws follow the rule of "equitable distribution" — a process which requires a fair outcome — when a court divides a couple's assets and debts in a divorce. In general, the court must identify marital property, which generally includes assets and liabilities acquired during the couple's marriage. The court must assign marital property equitably between the two spouses. Typically, the court treats credit-card debt acquired during marriage as a marital debt for which both parties are responsible, even if only one spouse accrued the debt.
Debts Assigned by Agreement
In a New York divorce, spouses can choose to divide their assets and debts voluntarily through a settlement agreement. The agreement must cover all legal issues related to the divorce, including the payment of debts. When one spouse or both spouses have accumulated credit card debts during the marriage, the agreement must assign responsibility for payment of those debts. When a New York court approves a settlement agreement and issues a final judgment in the divorce, the spouse responsible for the credit card debts must make the payments to comply with the court order.
Enforcement of Payments to Joint Accounts
Although a New York court may require payment of a credit card debt as part of a couple's divorce, enforcement may become an issue if an ex-spouse can't afford the payments or simply refuses to pay. If both spouses' names are on the credit card account, federal law allow nonpayment of the debt to affect both spouses' credit reports even if the state divorce judgment specifies that only one of them must pay the joint debt. Accordingly, a divorced cardholder should ask the financial institution to close any joint accounts upon divorce. Closure of joint accounts will help prevent an ex-spouse from accumulating additional debts in both parties' names.
If a former spouse refuses to pay a co-signed credit card debt as ordered by the divorce judgment, the other party may need to request enforcement help in state court. New York divorce laws include enforcement actions, such as contempt proceedings, when a former spouse fails to complete acts required by the divorce judgment.
Enforcement of Payments to Individual Accounts
In general, an individual account assigned by court order to one spouse for payment cannot become the other spouse's responsibility after divorce. If a credit card account is held in only one person's name — not co-signed — and that person receives responsibility for the debt in the divorce, the credit card company likely cannot seek repayment from the other party. However, each spouse should carefully review the terms of a settlement agreement or divorce judgment before assuming that he or she isn't liable for a particular debt.
- New York State Unified Court System: Divorce Resources: Divorce Information and Frequently Asked Questions
- New York State Unified Court System: Divorce Resources: Glossary of Legal Terms
- Legal Assistance of Western New York: What Happens to Property After a Divorce?
- Federal Trade Commission: Credit and Divorce
- Laws of New York: Domestic Relations: Section 245
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