How credit cards and debts are handled in a Texas Divorce

When people are contemplating a divorce their first concern is usually their children (if they have any) and the property. The family home, motor vehicles, vacation houses, etc. are at the forefront of most people’s minds at the time they begin to seriously contemplate divorce.

Maybe you’re in a similar position where you are moving towards a divorce and have already thought about these subjects. I would ask this question though: how much thought have you given to your and your spouse’s debts and other liabilities that have arisen during the course of your marriage?

Just as property is divided in a divorce, so are debts. How debts are divided and who bears the responsibility for each debt is a tremendously important part of any divorce. With experience handling divorces for clients across southeast Texas, the attorneys with the Law Office of Bryan Fagan, PLLC would like to share some information with you about credit cards and debts in general in the context of a divorce.

How to think about debt and prepare for it in your divorce

From my experience, debts associated with credit cards are among the most widely debated subjects during a divorce. The items I mentioned at the outset of this blog post: the family home, cars, home mortgage, along with retirement accounts make up the most commonly divided items in a Texas divorce.

Debts can be divided up in a divorce to be either your or your spouse’s responsibility but a divorce cannot absolve you of future liability on a credit card that bears both your and your spouse’s names on the account.

Hopefully, this has not happened to you, but I have had clients who have called me and complained that debt collection companies and the credit card companies themselves will call them at all hours of the day in an attempt to have their credit card balances paid off.

While there are laws associated with the means by which a credit card companies may attempt to collect their debts, I think the biggest frustration clients have in this area is that even though they are going through the divorce the credit card companies don’t seem to know or care. Let’s take a look at the two types of credit card debt you may encounter in your Texas Divorce.

Unsecured credit card debt basics

When a credit card company or other business/bank who issues you a credit card gives you a card without taking any collateral back, this is called an unsecured credit card. The majority of Americans have their credit cards through a set up like this. Visa, American Express, and Mastercard are examples of credit cards that are unsecured.

When you applied for the card the credit card company did some research on you and determined that you were creditworthy and a card was issued. It was their belief that you would pay your bill on time. If you fail to pay your credit card bill on time to an unsecured lender then you run the risk of having your interest rate increase or have additional fees applied to the balance.

One thing an unsecured creditor cannot do is attach a lien on a piece of property that you own in order to recover the value of the debt. Only if a lawsuit is filed and a judgment against you is rendered by a court can a lien be attached to piece of your property in order to pay off the debt.

Fortunately, in Texas, our laws are very debtor friendly. Your homestead and other types of personal property are largely protected against these sort of actions by creditors. No lien can be attached to your home and most people lack sufficient value in personal property for a lien to be attached there either. So while you are protected from these sort of creditors by virtue of our state laws, the debt will continue to mount with the credit card company who owns your unsecured debt.

Secured credit card debts in Texas

At the other end of the debt-spectrum are secured credit card debts. Creditors can issue secured credit cards when a card is attached to your bank account, for example.

Your bank account acts as the collateral involved in the creditor-debtor relationship. The bank who issues your card may require you to maintain a certain balance in your checking or savings account in order to protect them in the event that you fail to pay your credit card bill. The more history you develop with the bank issued card, and the more you pay your bills on time, you need to keep this certain amount of money may decrease.

The other main avenue for gaining a secured credit card is a card that is issued through a retail store like Best Buy, Target, or Kohls. If you fail to pay a store credit card on time the store will add on extra fees to each purchase and the debt will increase a great deal. Purchases that are made with the card can be taken back in the event that the debt is not timely paid. That’s in addition to a court judgment against you and possibly your spouse. Not a good set up for you or your soon to be ex-spouse

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