More and more couples are racking up excessive amounts of debt. To make matters worse, some debt, especially credit card debt, is hidden from the other spouse. Some blame this phenomenon on the fact that more marriages consist of two-income couples. Each spouse may find it difficult to relinquish control of his or her own money. But when divorce is on the horizon, how is this debt ultimately divided?
Many couples worry about the effect divorce will have on their credit card debt and their offsetting credit score. Some worry about how this debt will be divided. Some worry about a spouse running up significant charges during the divorce process. Others worry that certain credit cards or charges that have been hidden from their spouse will now be discovered or be forced to be made public--or the consequence of financial infidelity.
As a general rule in an equitable division state like Missouri debts incurred during the marriage for marital purposes is marital debt. This may hold true even if it’s listed in one spouse’s name only. The key requirements for a debt to be marital are: 1) it was incurred during the marriage and 2) for a marital purpose. However, in most cases, each spouse will be held responsible for credit card debt listed in his/her own name, but there is no guarantee that will happen.
Many couples open joint credit cards since both incomes can be used to establish a higher credit limit. These cards are usually considered marital and the court will decide how to divide the debt between parties based on what fits into the overall asset/debt distribution. But what about debt that is unknown to the other party?
Surveys indicate that 40-50% of all married people hide bills from their spouses. Sometimes this is the result of hiding expenses incurred during an extramarital affair. Sometimes this is the result of a spouse spending secretly to avoid the constraints of a couple’s budget. Sometimes this is a spouse opening an account in the other spouse’s name or in joint names and running up a bill…and the reasons go on. The question arises: Is financial infidelity a factor the court can take into consideration in determining property division including the division of marital debt?
Under Section 452.330 RSMo the court can consider the conduct of the parties during the marriage in determining the division of marital property and marital debt. In addition, the court is asked to consider the economic circumstances of each spouse at the time of the effective date of the division of property. Even though most individuals think that “conduct” refers to an affair or offensive treatment, financial spending and hiding marital debt is a major cause of divorce and what circumstance can be more disturbing than the disclosure of major, previously-unknown marital debt? So, what are your options?
• Determine all debt your spouse is hiding from you. Start with a credit report on yourself and one on your spouse. If there is a credit card or debt that you know nothing about, request copies of documents used in opening the account(s) and statements with itemized charges.
• Look further at bank and brokerage statements and cash withdrawals.
• Review your tax returns. Sometimes one spouse handles the finances and the other is kept in the dark. This excuse will not stand up in court.
• Gather all information regarding your finances. No guesses, just facts.
In addition, your spouse may agree to pay a joint debt or the judge may order the spouse to pay a joint debt. However, that liability remains a joint obligation to the creditor. Neither agreement binds the creditor who may sue should your ex default on payment. To avoid this contingent liability, get rid of joint accounts: through refinancing; paying off with funds from the divorce settlement; or by the other spouse opening a credit card in his/her name to transfer the balance from the joint account. It is critical that all joint credit card accounts be closed to all future charges when the marriage ends.
Divorce is challenging. The division of property and debt is stressful. But by reestablishing credit in your own name and monitoring your credit reports, you will be taking the first step in controlling your financial future.
AUTHOR: Kirk C. Stange, Esq. Kirk C. Stange is managing partner of Stange Law Firm, PC, which is a family law firm with multiple offices in Missouri and Illinois.
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More information about Stange Law Firm, PC
As a general rule in an equitable division state like Missouri debts incurred during the marriage for marital purposes is marital debt. This may hold true even if it’s listed in one spouse’s name only. The key requirements for a debt to be marital are: 1) it was incurred during the marriage and 2) for a marital purpose. However, in most cases, each spouse will be held responsible for credit card debt listed in his/her own name, but there is no guarantee that will happen.
Many couples open joint credit cards since both incomes can be used to establish a higher credit limit. These cards are usually considered marital and the court will decide how to divide the debt between parties based on what fits into the overall asset/debt distribution. But what about debt that is unknown to the other party?
Surveys indicate that 40-50% of all married people hide bills from their spouses. Sometimes this is the result of hiding expenses incurred during an extramarital affair. Sometimes this is the result of a spouse spending secretly to avoid the constraints of a couple’s budget. Sometimes this is a spouse opening an account in the other spouse’s name or in joint names and running up a bill…and the reasons go on. The question arises: Is financial infidelity a factor the court can take into consideration in determining property division including the division of marital debt?
Under Section 452.330 RSMo the court can consider the conduct of the parties during the marriage in determining the division of marital property and marital debt. In addition, the court is asked to consider the economic circumstances of each spouse at the time of the effective date of the division of property. Even though most individuals think that “conduct” refers to an affair or offensive treatment, financial spending and hiding marital debt is a major cause of divorce and what circumstance can be more disturbing than the disclosure of major, previously-unknown marital debt? So, what are your options?
• Determine all debt your spouse is hiding from you. Start with a credit report on yourself and one on your spouse. If there is a credit card or debt that you know nothing about, request copies of documents used in opening the account(s) and statements with itemized charges.
• Look further at bank and brokerage statements and cash withdrawals.
• Review your tax returns. Sometimes one spouse handles the finances and the other is kept in the dark. This excuse will not stand up in court.
• Gather all information regarding your finances. No guesses, just facts.
In addition, your spouse may agree to pay a joint debt or the judge may order the spouse to pay a joint debt. However, that liability remains a joint obligation to the creditor. Neither agreement binds the creditor who may sue should your ex default on payment. To avoid this contingent liability, get rid of joint accounts: through refinancing; paying off with funds from the divorce settlement; or by the other spouse opening a credit card in his/her name to transfer the balance from the joint account. It is critical that all joint credit card accounts be closed to all future charges when the marriage ends.
Divorce is challenging. The division of property and debt is stressful. But by reestablishing credit in your own name and monitoring your credit reports, you will be taking the first step in controlling your financial future.
AUTHOR: Kirk C. Stange, Esq. Kirk C. Stange is managing partner of Stange Law Firm, PC, which is a family law firm with multiple offices in Missouri and Illinois.
Copyright Stange Law Firm, PC - Google+
More information about Stange Law Firm, PC
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