In an Illinois divorce, when there is credit card debt in one spouse’s name, but the accrued debt benefited both parties during the marriage, the debt is presumed to be marital debt. Credit card charges for marital purposes such as groceries, family vacation, and household expenses are subject to the equitable division of marital property in an Illinois divorce proceeding.
Typically, the court will divide credit card debt in “just proportions’ considering facts such as each spouses contributions to the marriage both financially and otherwise; the length of the marriage; economic circumstances of each spouse to include age, health employability and income; and whether the parents share parenting time equally or one parent has primary custody of children.
How it typically works is if a spouse has credit card debt in their name only, the court may award them a larger slice of marital assets to offset the credit card obligation. For example, if a husband has 20K in credit card debt (marital expenses), the court may award him an extra 10K of equity in the house or a retirement account so that each spouse effectively pays half of the debt or whatever amount is deemed equitable. In effect, the spouse whose name is on the card ends up being the one who actually pays the creditor, but is reimbursed through an offset when dividing marital assets in a divorce
Of course, there are situations where there is not any assets to offset the debt so the divorce settlement may require the other spouse to make payments on a credit card that is not in their name. There is always the possibility that the spouse will not follow through, perhaps starting out strong and eventually lagging behind on payments, but the fact that the debt is assigned in the divorce settlement agreement allows the spouse listed on the credit card to legally pursue the derelict spouse for payment of their share of the debt. It is important to note, however, that the spouse listed on the credit card agreement is personally liable to the creditor for the debt despite any provision in the divorce settlement agreement.
Naturally, no one wants to be in a financial pickle after a divorce due to credit card debt. It is advisable to take steps to manage debt when contemplating divorce:
- Keep track of spending activity to demonstrate who is responsible for certain debts
- Check credit reports periodically to ensure no accounts have been opened in your name
- Try to refinance existing cosigned cards so that one party is solely responsible for them to minimize risk
If possible, pay off joint credit cards and stop using them to avoid accumulating more debt, freezing cards if there is a risk that the other spouse will run up charges
It is important to speak with an experienced Illinois property division attorney to understand what you can expect when dividing credit card debt in your divorce.
If the financial outlook is problematic due to the accumulation of credit card or other debt, consider seeking advice from a credit counselor or a financial advisor to help manage your personal finances during and after the divorce
When you have questions regarding the division of marital assets and debt in an Illinois divorce, contact the Libertyville Family Law Office of Ronald L. Bell & Associates for answers at 847-495-6000.