By JoAnne C. Holt, Divorce financial analyst
Credit cards are a serious problem if not handled properly during a divorce. This is one area where divorce planning is very helpful if not essential.
The Twentieth Judicial Circuit in Florida, where I live, provides something called a Temporary Standing Order that immediately takes effect when a Dissolution of Marriage action is filed. Since certain issues recur in most dissolution of marriage cases, these Standing Orders serve as temporary relief for the parties.
All districts have their own versions of the Standing Order. Some districts have Standing Orders for cases with children and another one for cases without children.
For example, The Standing Temporary Order for Dissolution of Marriage Actions – Seminole County (Florida) states both parties are “prohibited” from incurring additional debt which would bind the other party, specifically the use of joint credit cards, which should be used “exclusively for the necessities of life and only as a means of last resort”.
The Standing Temporary Orders for Dissolution of Marriage Actions (With and Without Children) – Lee County (Florida) have less stringent language. These Standing Orders say the “parties are urged to temporarily stop using joint credit cards except for absolute necessities and on as a last resort.”
Even with the stronger language found in Seminole County, credit card abuses happen regularly. What I see too often after the higher wage earner leaves the marital home (as is often the case) the other party out of fear, anger, retaliation or other reason, systematically begins using the joint credit cards for extravagant items such as new computers and bicycles for everyone in the house. While your attorney may comfort you by telling you this is a “post-filing” debt that the other party will be liable for, the fact of the matter is it is a joint debt in the creditors’ eyes. When it is time to divide assets and debts this will become an issue if the other party does not have the ability to pay the debt they rang up.
Additionally, even where there is language in the Standing Order that the party incurring additional debt must provide an accounting, it doesn’t say they have to pay it.
Your attorney will likely advise you that the joint credit card normally used for routine household expenses during the marriage, according to the Temporary Standing Order, cannot be suspended or closed during the pendency of the action.
The question is, “How do you avoid falling into this trap?” Before you file for divorce pull a credit report and find out what credit cards are outstanding in your name and your spouse’s name. You may find some cards you had no knowledge of. Get as many as possible closed and tell your spouse your financial advisor recommends you “consolidate” debt.
Next, get cards issued in the other party’s name in lieu of joint names. Explain this is for their credit building. Now you have established separate credit card debt liability, albeit marital, but you won’t have to worry about having no choice but to pay it to get divorced.
JoAnne C. Holt is a Florida-based CPA, certified family mediator, and certified divorce financial analyst. She also founded www.standbyhousing.com, an organization that presents alternative housing solutions to fathers going through a divorce. Her columns on finances and divorce will run monthly on DadsDivorce.com.