Are credit cards marital debt?

​The presumption in North Carolina is that all assets accumulated during marriage are part of the marital estate. There is no such presumption when it comes to martial debts. That being said, debts incurred during the marriage for the joint benefit of the parties are considered to be marital debts. This can certainly include credit cards only in the name of one spouse if those debts were accumulated for the benefit of the marriage.

Even though a creditor such as Bank of America or Wells Fargo may only be able to sue the cardholder a North Carolina family court judge can order the other spouse to make payments or account for that debt in the dividing the marital estate via property division otherwise known as equitable distribution. Equitable does not always mean equal, but judges usually try and divide marital assets 50/50 to the extent possible absent a compelling reason for an unequal distribution.

What are some reasons credit card debt may not be marital debt?

• ​The debt existed before the date of marriage.
• The debt was accumulated after separation.
• One party used the credit card for items that did not benefit the marriage.
• The debt was hidden from the other spouse.
• Segregating between marital and non marital charges on a credit card is simply too difficult.

​How do you split credit card debt in divorce?

If the debt was incurred to pay for food, housing, and other necessities then the debt is almost certainly marital debt. Other less clear issues relate to elective medical surgery, student loans, or debt incurred by one party without the knowledge of the other. Another common issue is extravagant or wasteful spending by one spouse on items such as clothing, jewelry, or random household items either with or without the express knowledge of the other spouse.
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The nature of credit card debt can sometime make deciding what is for the joint benefit of the parties nearly impossible when sorting through old Wal-Mart charges on a credit card statement that does not contain purchase details from years ago. Very often some of the charges on a credit card may include both martial and separate debt that a judge simply does not want to take the time to explore and they simply make a ruling as to each card be all marital or all separate debt.

Who has the burden of proving debt is marital?

​The party arguing debt is marital has the burden to prove that debt is marital by showing it was for the joint benefit of the parties. This means it is imperative to argue any debt solely in your name is martial by itemizing and explaining how the debt was incurred to benefit the parties. If you want to argue that your wife spent thousands on clothes and home decor without your permission, but you noticed new furniture and new clothes over a period of 10+ years then it may be difficult to convince a Judge you did not effectively condone those purchases.

Comstock v. Comstock, 771 S.E.2d 602 (N.C. App., 2015) 

​The North Carolina Court of Appeals decided that debt incurred by the husband for “strip clubs, alcohol and gambling” was in fact his separate debt. The Court agreed with the trial court finding that that the husband failed to meet his burden that charges related to “women” and “alcohol” were incurred for the joint benefit of the parties.

What does joint benefit of the parties mean?

The North Carolina Court of Appeals in Geer v. Geer, 353 S.E.2d 427 (N.C. App., 1987) talked about “joint benefit” but gave no definition and neither does any NC statute. This leaves it up to the Court decide exactly what is for the joint benefit of the parties. Just because the debt is in joint name does not make it marital debt and just because the debt is only in the name of one spouse does not make it separate debt. A better way of looking at what is “joint debt” is asking- did the debt benefit the marriage? Although lunch bought by the husband while at work may not directly benefit the wife, eating is necessary to stay alive and maintain a job that provides income. As stated above some items are black and white and others are a shade of grey open for parties to argue about in Court.

​Am I responsible for my spouse’s credit card debt after separation?

If you are a co-signor on a credit card with your spouse then the creditor can sue both you and your spouse upon default- and they probably will sue both parties. Be aware there is a distinction between being a co-signor who is certainly liable versus simply being an authorized user who is usually not liable. If you have any doubt you should run a free credit report and also verify directly with the creditor. Even if a Judge orders your spouse to pay the debt when he or she fails to make the payment you may be sued right along with them. A family court judge can’t stop Target National Bank from suing you and you can’t waive your Equitable Distribution Order around as a defense.
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If you are not a co-signor then you should not have to worry about a lawsuit from a credit card company, but martial debt could certainly be divided by a family court judge. This division could even include you being ordered to pay a debt not in your name!

How is credit card debt split after separation?

If you have joint debt you need to make sure it is divided somehow either via a separation agreement or Court Order. Failure to have a court order or binding contract between the parties opens the door years later for a spouse to keep a joint card open indefinitely and run up new debt or to stop paying on even a closed card that results in a unexpected lawsuit and irreparable damage to a credit score. It is important to remember that even a written agreement with your spouse does not stop a lawsuit from a joint credit card in default. When dividing debt it is best to close out any joint cards with each person taking whatever cards are in their individual name or transferring balances to cards just in their name to protect the other spouse, otherwise you may end up having to file bankruptcy or consider debt negotiation to prevent a judgment.

How do I get my name off a joint credit card?

​You can certainly call the creditor and see if they will release you from a joint credit card with your spouse, but don’t expect the answer to be yes. The creditor has little incentive to release one spouse from a debt in case one party files bankruptcy or dies they want the ability to come after the other person. Even if the credit refuses to remove your name from a debt you should insist on the card being closed to prevent new charges. Another option is convince your spouse to transfer an existing balance from a joint card onto a new card only in their name. Many banks offer this option with a zero percent interest rate for those with good credit.