What Happens to Joint Credit Cards and Loans in a New York Divorce?

Key Takeaways

• Credit card debt in a New York divorce may be treated as marital debt, but the way it is divided depends on the circumstances of the marriage and how the debt was incurred.
• A divorce agreement does not automatically remove your legal responsibility for joint debt. You may still be responsible for an account if your name remains on it.
• Removing your spouse from a joint account may require refinancing, closing the account, or meeting the lender’s requirements.
• A New York divorce attorney in Brooklyn or Manhattan can help you understand your rights and protect your financial interests during the divorce process.

How Divorce Can Change Your Financial Responsibilities

Divorce involves much more than deciding where you and your spouse will live. You also need to address the financial obligations you shared during your marriage, including credit cards, personal loans, car loans, and other forms of joint debt.

If you are dealing with credit card debt in a New York divorce, you may wonder who will be responsible for paying the balance after the divorce is finalized. The answer depends on several factors, including whether the debt is considered marital, whose name is on the account, and what your divorce agreement says.

It is also important to understand that your responsibilities to your spouse and your responsibilities to a lender are not always the same. This can become especially important when considering removing your spouse from a joint account.

What Counts As Joint Debt In A New York Divorce?

Joint debt generally refers to an obligation for which both spouses are legally responsible. 

Common examples include:

• Joint credit cards
• Co-signed personal loans
• Joint auto loans
• Mortgages
• Home equity loans or lines of credit

However, not every debt acquired during a marriage is treated exactly the same way. New York generally follows equitable distribution principles when dividing marital property and debts.

For example, a credit card may be in only one spouse’s name, but the balance could still be considered when dividing marital finances. A New York divorce attorney in Brooklyn or Manhattan can review your financial situation and help determine how your debts may be addressed.

Does A Divorce Remove Your Responsibility For A Joint Account?

Not necessarily. This is one of the most important issues to understand when dealing with credit card debt in a New York divorce.

Imagine you and your spouse have a joint credit card with a $10,000 balance. Your divorce agreement states that your spouse will pay the entire balance. Even so, the credit card company may still consider you responsible for the debt if your name remains on the account.

The same can be true for joint debt involving personal loans, car loans, or other financial obligations. Your divorce agreement may determine who is responsible for making payments between you and your spouse, but it does not automatically change your contract with the lender.

What Happens To Joint Credit Cards?

If you and your spouse share a joint credit card account, you may need to decide whether to close the account, pay off the balance, or move the debt into one spouse’s name.

Depending on your circumstances, options may include:

• Paying off the balance
• Transferring the balance to an individual account
• Refinancing the debt
• Closing the joint credit card
• Having one spouse assume responsibility for payments

Simply stopping payments is usually not a good solution. Missed payments can damage both spouses’ credit and may lead to additional fees, interest, or collection activity.

Before making changes to credit card debt in a New York divorce, a New York divorce attorney in Brooklyn or Manhattan can help you understand how those changes could affect your credit and your legal obligations. 

Can You Remove Your Spouse From A Joint Account?

Removing your spouse from a joint account may seem like an easy way to separate your finances, but it is not always that simple.

For a joint credit card or loan, one spouse generally cannot remove the other borrower without the lender’s approval. The lender may require both spouses to agree, or the remaining borrower may need to qualify for the account independently.

In some cases, removing your spouse from a joint account may require refinancing the debt or applying for a new account in one spouse’s name.

Before attempting to remove a spouse from an account, consider:

• Whether the account is actually joint
• Whether the lender allows one borrower to be released
• Whether the remaining borrower qualifies independently
• Whether closing the account could affect your credit
• Whether there is an outstanding balance

Taking action early and speaking with a New York divorce attorney in Brooklyn or Manhattan may help you avoid financial complications after your divorce.

How Is Debt Divided In A New York Divorce?

New York uses equitable distribution to divide marital property and debts. Despite the name, equitable distribution does not necessarily mean that every debt is divided equally.

Instead, the court considers the circumstances of the marriage and the financial situation of both spouses.

When addressing credit card debt in a New York divorce, the court may consider:

• When the debt was incurred
• What the money was used for
• Whether the debt benefited the household
• Each spouse’s financial circumstances
• Whether one spouse accumulated debt for personal purposes

The same type of analysis may apply to other forms of joint debt and marital obligations.

Protect Your Finances While Your Divorce Is Pending

Your financial responsibilities do not stop just because you and your spouse are separating. If you have joint debt, it is important to stay informed about your accounts while the divorce is pending.

Consider taking these steps:

• Review your credit reports
• Make a list of all shared accounts
• Monitor balances and payment activity
• Keep records of payments you make
• Avoid unnecessary new charges on shared credit cards
• Discuss financial concerns with your attorney

If your spouse agrees to pay a joint account but fails to do so, you may have legal options under your divorce agreement. However, the lender may still pursue both borrowers if both remain legally responsible for the account.