One of the most impactful aspects of any divorce is the division of marital wealth. Property division will have a lasting impact on the financial stability of both parties for many years to come, and is understandably a central area of focus. However, Louisiana residents should remember that assets are not the only financial matter that will come up during property division; debt must also be divided.
In terms of credit card debt, the common approach is to treat debt incurred during the course of a marriage as shared debt. That is true even when the purchases were for the primary benefit of only one spouse. Negotiating the division of those debts is important, but is only the first step.
Even if a spouse agrees to take on responsibility for the balance owed on a line of credit, the other spouse could still be on the hook if repayment does not ultimately take place. Credit card issuers are not bound by the terms of a divorce agreement. If there are two individuals listed on the account, then the card company will pursue both parties if one fails to make payments as agreed upon.
The best way to avoid credit score damage, collections and an inflated debt-to-income ratio is to insist that the party who will take on the debt either pays the account off entirely or has the debt placed in his or her sole name. In some cases, that may mean cashing out assets to pay off the debt. Taking care of these matters early on in the property division process is important, and can provide Louisiana spouses with a great deal of peace of mind.
Source: The Huffington Post, “Divorce and Credit Card Debt“, Justine Borer, April 3, 2017