First, it is important to understand the difference between having an individual account and a joint account, if you are considering a New Jersey divorce or separation. If you have joint accounts, regular payments must still be made during this difficult time so that your credit will not suffer. Each person is still responsible for the debt from a joint account, even if a divorce decree assigns separate debt obligations to each spouse. In other words, former spouses who run up bills and do not pay them can hurt their ex-partner’s credit histories on jointly-held accounts.
If you are an “authorized user” on your spouse’s individual account, there could also be a problem because the creditor must report the credit history of that individual account to the credit bureaus in your spouse’s name as well as in your name. In this case, you could be risking having your credit history rating affected if your ex-spouse stops paying the bills on his or her account.
If you have an individual account, an account in your name only, no one can negatively affect your credit history record. This is the type of account that you want, especially if you’re thinking of starting a New Jersey divorce proceedings.
It is best to open your individual credit account to be sure you’re establishing your own credit history. As an alternative, you may be able to get the creditor to convert a joint account to individual accounts. In this case, you may be required to reapply for credit individually. Please note that, based on your new applications, you could be given or denied credit.
The bottom line is that you may want to close all joint accounts or accounts in which you are an authorized user, once you have established your own credit worthiness, to avoid being responsible for future debt incurred by your soon to be ex-spouse. In the case of a mortgage or home equity loan, refinancing may be required to remove a spouse from the obligation.
Equitable Distribution of Credit Card Debt in a New Jersey Divorce
The presumption is that there is a 50-50 split of any marital debt. However, marital debt is divided as part of any property settlement agreement. What this means is that any equitable distribution must take into account not only the marital debts but also the marital assets.
Regarding how the courts will assign the marital debt, the key here is whether or not the debt incurred is specifically related to supporting the family. If the debt was incurred to support the family, both parties are responsible equally regardless of who made the purchase. However, if the debt is related to individual pursuits such as gambling, massages, having an affair, then the court will assign that particular debt to the person who incurred it. Basically, the law supports that each case will be based on its own circumstances.
Other Considerations for the Apportionment of Marital Debt
Even though the basic rule in New Jersey divorce proceedings is that debts that were accumulated during the marriage must be allocated between the parties, the court may also consider who has a greater income and divide the debts accordingly.
In reality, it is preferable that all marital assets be sold and that as much of the marital debt be paid off from these proceeds. This will protect you from the likelihood that the other party will not honor the terms of judgment of the divorce and possibly declare bankruptcy leaving you alone to pay the credit card debt to the creditor.
Again, you should try to close or convert any joint accounts you have with your spouse, who is not to be trusted to behave honorably after a divorce. It is a mistake to allow joint credit card bills to linger unpaid which ultimately can come back to haunt you. In fact, it is best to close out all joint credit cards once you have established your own credit.
What Happens if Your Ex-Spouse Files for Bankruptcy
Because life is not always fair, your ex-spouse may file bankruptcy even after agreeing to abide by the New Jersey divorce judgment. Because the credit card companies just want their money, they don’t care who they collect it from, and in this situation, they will come after you for the whole balance from a previously jointly-held account.
To protect yourself, you should request that a special clause be inserted into the property settlement agreement or divorce judgment that limits the impact of a bankruptcy. In addition, in the advent of a bankruptcy by your ex-spouse, a Lepis application can be filed by you to request that the alimony, child support, and the terms of the divorce settlement be reconsidered because of your ex-spouse’s bankruptcy. This is allowed under New Jersey Law which states that the courts have continuing jurisdiction to review awards of alimony and child support and may increase or decrease such awards where parties’ circumstances have changed.
Closing your Joint Credit Cards
As stated before, it is best to establish your own credit before closing your joint credit cards. Once you have your own credit accounts and/or were able to convert a joint account to individual accounts, then go ahead and close all other joint credit cards as soon as possible.
The following are the steps you should take:
- Write the credit card company and notify them of the impending New Jersey divorce.
- Request that the account be closed and the credit cards cancelled.
- Ask for a current statement of the account and make the company aware that you do not intend to be held liable for any more debt after the date of cancellation.
- Send your correspondence via certified mail to retain proof of receipt.
- Credit card company may request that you pay the outstanding balance in full. If you can, do so. If you cannot, then request that the account be placed on an inactive status.
- Credit score a mystery to many consumers (miamiherald.com)
- When It Comes To Love, Marriage, And Divorce…Money Matters (boston.cbslocal.com)