Since California is a "community property" state, creditors aren't bound by divorce decrees. Meaning, they can go after you for marital debt if your former spouse doesn't pay up.
We recommend that our clients leave their marriage without debt if possible. Two solutions are to pay off all credit cards together, or divide up joint debt on cards and transfer them to cards in each spouse's name. Ultimately, the goal is to remove your liability from your spouse's debts.
It's a good idea to take a close look at all of your debts and make sure that you cancel all joint credit cards during the divorce process. We don't recommend going into the next chapter of your life with credit card debt; it can be painful.
Should your ex not pay what they're supposed to pay, or should they file for bankruptcy, the creditors can go after you for the full amount, plus interest and penalties.
Even if provisions in your divorce decree say that your ex is responsible for certain debts, going back to court is costly and time consuming.
Our Recommendations About Debt
Consider these recommendations:
- Try to leave your marriage with zero debt.
- Cancel joint credit cards.
- Consider using joint savings or home equity lines of credit to pay off marital debt.
- If you can't afford to pay off joint debt, divide the debts on joint cards and transfer it to cards in each spouse's name.
If you're worried about your spouse running up credit cards, one way to prevent this is to cancel all joint cards, and put them in your own name. This way, you're protected from your spouse incurring more debt.
We encourage you to contact us to discuss the specifics of your debt situation so you can take advantage of the best financial strategies.