On Marrying and Divorcing Credit Card Debt

Dealing with credit card debt is difficult enough on its own, but it can get even more complicated when marital considerations are entered into the equation. Typically, both parties are equally responsible for all debt accumulated during the marriage. But things get much fuzzier when debts accumulated prior to or after the marriage are added to the picture. Helping people find their bearings in this gray zone has been keeping financial experts busy for a long time.

Last week, for example, a CreditCards.com’s reader sought advice on protecting herself from her fianc??’s $150,000 debt mountain (which he claimed was all his ex-wife’s fault). She is right to be worried, because even though she will not be in any way responsible for paying any portion of her future husband’s debt, his credit has already taken a hit, which can directly or indirectly affect her in at least two major ways:

• Joint credit applications. Any time the couple applies jointly for any form of credit – e.g. credit cards, auto loans or mortgages – the husband’s poor credit score can lead to a higher interest rate or an outright rejection.
• Debt servicing. Paying down such a huge amount is sure to affect the husband’s ability to pull his weight in keeping up with the couple’s current bills, putting additional pressure on his wife, whose credit may suffer as a result.

It goes without saying that, for the average person, dealing with such an issue will not be a simple matter. On the one hand, you wouldn’t want your spouse’s past financial troubles to affect your future happiness. On the other, if you are not careful, such a huge debt can quickly turn into a major headache. Ideally, if you have the means as a couple, you should pay off the debt just as quickly as you can. If you don’t, you should be very careful to keep all of your financial accounts separate.

Now, this may sound as an extreme case, and it probably is, but it is far from isolated. Again from CreditCards.com we learn of another conjugal debt story, involving a divorcing couple. This time the husband is concerned that, once they get divorced, his unemployed wife will run up their joint credit cards’ balances, damaging his credit in the process.

The only way to guarantee that his wife’s spending habits will not have any effect on his personal finances after they get divorced, is to close down all joint accounts, even if that means paying off the existing balances. Otherwise, he is inviting trouble.

For most of us money doesn’t matter when we fall in love. Unfortunately, financial considerations come into play much more often when things don’t work out the way we hoped and a divorce becomes the only way out. How we resolve financial issues at this stage will depend on the concrete circumstances, but one thing is certain: it will be a messy affair and you will have to make compromises. Just as you did during your marriage.

Image credit: MyProspera.wordpress.com.