One issue a separating couple must resolve in their divorce is what to do about their credit card debt. Credit card debt accumulated during a marriage is considered marital property under the equitable distribution laws in effect in most states and can be divided and assigned regardless of whose name appears on the monthly statements. The actual treatment of the debt in court, however, depends on several factors.
When the Debt Was Incurred
Marital debt generally consists of debt accumulated by either spouse during the marriage. As such, a party that came into the marriage with significant credit card debt is not entitled to force her spouse to share in it upon breakup of the marriage, even if she incurred that debt for joint purposes while the parties were living together. Many states also will not include credit card debt accumulated after separation in the definition of marital debt except to the extent a party incurred post-separation debt for marital purposes, for example, making repairs to the former marital residence.
The Purpose For Which the Debt was Incurred
Although a party may have incurred credit card debt during the marriage, a court may refuse to divide the debt in an equitable distribution or community property action if the party incurred the debt for an improper purpose, such as purchasing gifts for a lover, gambling or taking cash advances to buy drugs. A party may be able to escape a partial assignment of his spouse's credit card debt if he can prove she incurred it in the course of economic misconduct.
Distribution of Property
The division of a party's credit card debt will also depend on the division of the marital estate as a whole. Property and debt division pursuant to a divorce is a mathematical balancing act that requires a court to divide assets and debts so as to achieve a fair distribution in equitable distribution states or an equal distribution in community property states. While state law may classify a given credit card debt as marital, a party may be assigned the whole debt if distributing it to him helps to balance the division.
Whose Name the Debt is In
Although a debt can be classified as marital regardless of whose name it appears in, courts have a preference for distributing assets and debts intact to the parties. As such, a party carrying a credit card debt out of the marriage may continue to shoulder the burden after a debt division. If a court elects to distribute the debt in this manner and it causes an imbalance in the overall estate division, it may order the other party to make distributive payments to equalize the division.
Income of the Parties
In equitable distribution states, a 50/50 division of assets and debts is presumed to be, but is not always, equitable. One of the major factors in an unequal distribution is the income of the parties. A party that earns a six-figure salary may find himself stuck with significantly more marital credit card debt than his homemaker ex-spouse. His higher earning capacity translates into a greater ability to pay and also a greater ability to recover.
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