Couples going through divorce should be aware of the impact joint accounts may have on their financial future. Many divorce attorneys will tell clients that joint accounts are often more harmful than helpful in most cases and here's why.
Joint accounts can complicate divorce in many ways. Keeping a joint credit card open while going through a divorce is a mistake that many couples unfortunately make. Many times, the divorce decree will stipulate that one person is responsible for paying off a credit card account. Since the divorce decree cannot physically require a person to pay off the debt, some ex-spouses may not pay off the debt or worse, they may rack up debt to the maximum credit limit.
If the spouse does not pay off the credit card debt, most card issuers will have creditors contact the card holders to collect the unpaid debt. Joint credit cards will have both spouses name on the credit account, so if one spouse does not pay up, the other spouse will also be contacted.
To the surprise of many divorced spouses, they can still be held responsible to repay the credit card debt even if the divorce decree said that their ex-spouse was supposed to pay off the credit card. Under debt collection laws, creditors can go after both parties on the account so both spouses are still liable for the debt.
Spouses getting divorced should heed this warning. For your own financial freedom after divorce, it is best to close out all joint accounts, especially joint credit cards. Spouses who are going to be responsible for paying off credit card debt can get a new account and transfer the outstanding balance. This helps protect both spouses from the other spouse putting more debt on their credit card.
Source: Gazette, "Money & the Law: Joint accounts can lead to sticky issues," Jim Flynn, Nov. 4, 2012
Our law firm represents individuals going through divorce. To learn more about our firm, please visit our Colorado divorce page.