Rachel and Martin recently divorced. Their divorce decree stated that Martin would pay the balances on their three joint credit card accounts. Months later, after Martin neglected to pay off these accounts, all three creditors contacted Rachel for payment. She sent them a copy of her divorce decree insisting she was not liable for the accounts.

The creditors correctly responded that they were not parties to the divorce decree and that Rachel was still legally responsible for paying off the balances. Rachel later discovered that her credit report reflected late payments and delinquency.

A tough lesson for Rachel to learn but divorce neither absolves or forgives debt. Something her attorney should have informed her of but often neglects.

There are two types of credit accounts in consumer transactions, individual and joint. You can permit authorized persons to use the account with either.

Individual Account

In an individual account, the creditor considers only the applicants’ income, assets, and credit history. Whether married or single only the applicant is responsible for paying off the debt. The account will appear on that persons’ credit report, and may appear on the credit report of any person the applicant authorizes to use the credit account.

However, if the individual resides in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), that person and their spouse may be responsible for all debts incurred during the marriage and the individual debts of one spouse may appear on the credit report of the other.

Debt incurred prior to marriage is the sole responsibility of the person who incurred the debt.

Joint Account

In a joint account, the applicant’s income, assets, and credit history along with any co-applicant is considered for a joint account and regardless of who handles the bills; all account holders are responsible for payment of the debt. A creditor who reports the payment history of a joint account to a credit-reporting agency must report it in all account holders’ names (if the account was opened after June 1, 1977).

All account holders are responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to either spouse.

Authorized “Account Users”  

An individual or joint account holder may authorize another person to purchase on the account. If a spouse is named as the authorized user the creditor who reports payment history to a credit reporting agency must report the information in both the account holder and spouses’ name (if the account was opened after June 1, 1977).

A creditor may also report the payment information in the name of any authorized user as well.

While authorized users have permission to use the account, only the account holder, and not the authorized users, is contractually liable for paying any debts charged to the account, regardless of who charged them.

Closing or Changing the Account

By law, a creditor cannot close a joint account due to a change in marital status, but can do so at the request of either spouse.

A creditor, however, is under no obligation to change joint accounts to individual accounts. The creditor can require either account holder to reapply for credit on an individual basis and then, based on the new credit application, extend or deny credit.

In the case of a mortgage or home equity loan, a creditor is likely to require refinancing to remove a spouse from the obligation.

I wish you well!

The information provided above is for educational purposes only and not provided as legal advice. Legal advice should be obtained from a licensed attorney in good standing with the Bar Association and preferably Board Certified in either Creditor Rights or Bankruptcy.