How Credit Cards and Debts Are Handled in a Texas Divorce

When contemplating divorce, most people naturally prioritize concerns like children and property, including the family home, vehicles, and vacation homes. However, amid these considerations, it’s crucial not to overlook debts and liabilities accumulated during the marriage, including credit card debt. If you’re moving towards divorce, have you thoroughly assessed your and your spouse’s financial obligations, including credit card debt, in the context of a Texas divorce?

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.

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. 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. 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, significantly increasing 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 set up for you or your soon to be ex-spouse.

Conclusion

Addressing credit card debt within the context of a Texas divorce is paramount for achieving a fair and equitable resolution. By proactively assessing and addressing these financial obligations, couples can navigate the divorce process with clarity and transparency. Understanding how to divide credit card debt ensures both parties start fresh financially. This minimizes future disputes and facilitating a smoother transition into post-divorce life.

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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14. What are some signs that your spouse may be defrauding you?

Bryan Joseph Fagan( Attorney )

Bryan Fagan, a native of Atascocita, Texas, is a dedicated family law attorney inspired by John Grisham’s “The Pelican Brief.” He is the first lawyer in his family, which includes two adopted brothers. Bryan’s commitment to family is personal and professional; he cared for his grandmother with Alzheimer’s while completing his degree and attended the South Texas College of Law at night.

Married with three children, Bryan’s personal experiences enrich his understanding of family dynamics, which is central to his legal practice. He specializes in family law, offering innovative and efficient legal services. A certified member of the College of the State Bar of Texas, Bryan is part of an elite group of legal professionals committed to ongoing education and high-level expertise.

His legal practice covers divorce, custody disputes, property disputes, adoption, paternity, and mediation. Bryan is also experienced in drafting marital property agreements. He leads a team dedicated to complex family law cases and protecting families from false CPS allegations.

Based in Houston, Bryan is active in the Houston Family Law Sector of the Houston Bar Association and various family law groups in Texas. His deep understanding of family values and his professional dedication make him a compassionate advocate for families navigating Texas family law.