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Smith Welch Webb & White Blog

Wednesday, June 29, 2016

What Happens to Credit Card Debt During Divorce

There are many important things to take into consideration during a divorce.  First and foremost for couples with children, child custody and visitation rights are at the top of the list.  Financial support and the equitable division of debt are also important as both parties strive to establish and maintain separate households. 

Laws regarding the division of marital property and debts vary by state, and Georgia is an “equitable distribution” state.  The word “equitable” does not necessarily mean debt is equally divided between the parties. Instead, Georgia courts are tasked with assigning debt fairly based on several factors, including each person’s income, ability to pay, the length of the marriage, and behavior during the marriage. 

While every situation is unique, here is a quick primer to help understand the difference between joint debt, individual debt and debt assignment during divorce:

Debt incurred by a spouse prior to the marriage remains that person’s responsibility and is not considered marital or joint even if the debt benefitted both parties.  In Georgia, marital debt is defined as any debt acquired by either spouse during the course of the marriage.  Even if debt was only taken out in one person’s name during the marriage, such as a personal credit card, it’s still considered marital debt under Georgia law. 

Parties can agree how to divide their marital debt any time during the course of the divorce.  If they are unable to reach an agreement, a court will tell them who will be responsible for each debt once a final hearing is held.  As its guide, the court will apply the principle of equitable distribution when dividing the debt between the parties.  One party can be ordered to pay a debt in both parties’ names, or even debt solely in the other party’s name.  Ultimately, however, it is up to the party whose name the debt is in to ensure that the debt is paid in order to prevent issues with creditors.    

Keep in mind though, when contract law and divorce law intersect, it is the contract law that governs the agreement between you and the creditor.  In other words, if your ex-spouse defaults on a debt that was originally in both names (such as a joint credit card) or the other spouse’s name (such as medical bills relating to a child), yet was assigned to him or her during the divorce, the creditor can come after you (the original or joint debtor) for collection.  The only way this can be avoided is to remove the name of the party not assigned the debt from the account. 

 

Any representations regarding the law in this Blog is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog publisher. The Blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.


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