How Credit Cards and Debts Are Handled in a Texas Divorce

When contemplating divorce, many people naturally focus on concerns like children and property, such as the family home, vehicles, and vacation homes. However, it’s equally important to address debts in divorce, including liabilities like credit card debt, which can easily be overlooked. If you’re approaching divorce, have you carefully assessed your financial obligations, along with your spouse’s, in the context of a Texas divorce? Understanding how debts will be divided is a crucial step in ensuring a fair financial resolution.

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. However, 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 about debt collection and credit card companies. They will call them at all hours of the day in an attempt to have their credit card balances paid off.

There are laws governing how credit card companies can attempt to collect their debts. However, the biggest frustration clients face is that credit card companies often seem unaware or indifferent to the fact that they are going through a divorce. Even though the divorce is in progress, these companies continue their collection efforts without regard to the situation. 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 that 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 setup like this. Visa, American Express, and Mastercard are examples of credit cards that are unsecured.

When you applied for the credit card, the company assessed your creditworthiness and issued the card based on their belief that you would pay your bill on time. If you fail to make timely payments, you risk having your interest rate increase or additional fees added to your balance.

However, an unsecured creditor cannot attach a lien to your property to recover the debt. Only if a lawsuit is filed and a court renders a judgment against you can a lien be placed on your property to satisfy the debt.

Fortunately, in Texas, our laws are very debtor-friendly. Your homestead and other types of personal property are largely protected against these sorts of actions by creditors. No lien can be attached to your home. Most people lack sufficient value in personal property for a lien to be attached there either. While state laws protect you from these types of creditors, the debt will continue to accumulate with the credit card company that 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 that issues your card may require you to maintain a certain balance in your checking or savings account. This is to protect them in the event that you fail to pay your credit card bill. As you build a longer history with your bank-issued card and consistently pay your bills on time, the required amount of money you need to maintain may decrease.

Another common way to obtain a secured credit card is through retail stores like Best Buy, Target, or Kohl’s. Failure to pay a store credit card on time can result in additional fees added to each purchase. This significantly increases the debt. Furthermore, if the debt remains unpaid, purchases made with the card can be retracted. That’s in addition to a court judgment against you and possibly your spouse. Not a good setup for you or your soon-to-be ex-spouse.

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Conclusion

Addressing debts in divorce, particularly credit card debt, is crucial for achieving a fair and equitable resolution in a Texas divorce. By proactively assessing and managing these financial obligations, couples can navigate the divorce process with greater clarity and transparency. Understanding how to divide credit card debt ensures that both parties can start fresh financially. This minimizes future disputes and helping to facilitate a smoother transition into post-divorce life. Properly handling debts in divorce not only protects your financial future but also promotes a more amicable separation.

Divorce can be emotionally challenging. However, addressing credit card debt head-on is a proactive step towards financial stability and independence. By seeking guidance from legal professionals well-versed in Texas divorce law and financial planning, couples can navigate the complexities of dividing credit card debt with confidence. This ultimately paves the way for a more secure financial future beyond divorce.

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Other Articles you may be interested in regarding

1. Texas Divorce and Your Credit Score: Essential Financial Advice
2. Managing Credit Card Debt Amidst Divorce Proceedings
3. Debt, Credit Cards, and Their Impact on Divorce in Texas
4. Handling the issue of credit card debt during your divorce
5. What Happens to Marital Debt During a Texas Divorce?
6. Know How Property and Debts are Divided, When Preparing for Your Texas Divorce
7. What Happens to Marital Debt During a Texas Divorce?
8. Dividing Property in a Texas Divorce – The Just and Right Division
9. Why is Separate Property Important and How to Keep it Separate in a Texas Divorce?
10. What Wikipedia Can’t Tell you About Texas Divorce and Marital Property Division
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13. Does it Matter Whose Name is on Title or Deed of Property in a Divorce in Texas?
14. What are some signs that your spouse may be defrauding you?