Divorcing joint credit card debt.

The end of a marriage is an emotional and traumatic event. Not only are you severing the marital union but you are also severing the social and financial union which has been built up during the years of marriage.   Spouses weave and intertwine their lives together with the expectation that the union will last. Couples will buy houses, cars, furniture and other items in anticipation of spending their lives together.   They will incur joint debt in the form of loans and credit cards which upon divorce remains a legal obligation for both individuals.

Pennsylvania is a common law state or equitable distribution state. Property and debt are divided during a divorce according to a number of factors including when and for what purpose the assets and debt where brought into the marriage. In contrast, in a community property state, debts and property acquired during the marriage automatically become community property and are divided equally.[1] In Pennsylvania, marital property is not property that is thrown into the pot to be divided equally as in community property states, but property impressed with equitable consideration which must be evaluated before apportionment is considered.

In Pennsylvania, if debt is incurred during the marriage and before separation but it was in one spouse’s name only, it will usually be the responsibility of that spouse in a divorce.[2] However, if spouses jointly executed the loan and/or credit card agreement as co-signers or co-account holders, the bank or credit card company can come after either spouse and/or both spouses for the entire obligation. The credit card company’s right to sue either and/or both spouses survives a divorce decree as it is derived from the credit card agreement. Any equitable distribution agreement between the spouses may address which spouse will be responsible for certain credit card obligations, however, that only addresses the rights and/or obligations between the spouses.   A bank and/or credit card company is not legally obligated by an equitable distribution agreement between spouses and/or a divorce decree. Nor does a family court judge have authority to alter the terms of that contract with the bank or credit card company.

In other words, if your name is on the credit card account, you owe the money to the bank or credit card company. One spouse may sue the other spouse under the equitable property distribution agreement but the bank or credit company can sue either spouse or both spouses for the entire amount due on the account. For this reason, if it is possible to leave the marriage without any joint debt, all steps should be taken to do so.   Sell assets to pay off any jointly held debt or transfer joint debts to individual spouses if possible.

If one spouse should default on the joint obligation or file for bankruptcy as a divorce usually causes significant financial strain, the other spouse may be sued for the entire balance on that joint obligation.

[1] The Pennsylvania Supreme Court has declared community property laws unconstitutional and a deprivation of property in violation of due process. See Willcox v. Penn Mutual Life Insurance Co., 357 Pa. 81, 55 A.2d 521 (1947); Everson v. Everson, 494 Pa. 348, 431 A.2d 889 (1981); Bacchetta v. Bacchetta, 498 Pa. 227, 445 A.2d 1194 (1982).

[2] If the debt was in only one spouse’s name, but was incurred during the marriage for the benefit of both, or for a marital purpose, it may be treated as a marital debt and be subject to Pennsylvania’s laws of equitable distribution during divorce. Id.

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