Dealing with credit card debt after divorce

Ex-wife stuck with credit card debt
By Ronald Lipman
Published 10:44 p.m., Friday, February 17, 2012
Original Article

Q: My friend got divorced four years ago. There was an interim order by the court for her ex-husband to service their credit card debt, but during their 15-month separation, he never did. By the time of their divorce, the late fees and interest on the card had made the debt unmanageable. It now stands at $45,000. That debt appears on checks of her financial background and probably is the reason she has only been offered straight commission jobs. Can she sue her ex-husband now for the $45,000 and for her pain and suffering caused by the bad debt? Their divorce decree did not address this.

A: No, she can’t sue her former husband for the $45,000, nor can she sue him for her pain and suffering. Under the law, she cannot sue him to enforce any of the interim orders.

She can only sue him to enforce the divorce decree, and since the decree was silent on the debt issue, there would be no basis for her claim.

The above article appeared in Ronald Lipman’s legal column in the Houston Chronicle. It reminded me of how important credit card and other debts can be in a divorce and how little it is understood, even by many attorneys. As a family law attorney who routinely does divorces, I very often see people with large credit card debts, especially during the recent recession. Here is a recap of what I tell my clients:

1. There are two difference forces at work when it comes to debt in a divorce. One is the judge who grants the divorce; the other is the creditor who is owed. Each of them can do different things.
2. The judge can determine which party has to pay community debt (debt accrued during the marriage, no matter whether it is in the name of the husband or the wife). The judge tries to make a fair division of all the property, the assets as well as the liabilities. Debts are a part of this division. The Texas Family Code, our set of laws for divorces, says that the judge must make a “just and right” division. This means the judge can, if he or she decides, order wife to pay debt that stands in the husband’s name and vice versa.
3. The creditor who is owed money can only look to the person who signed up for the debt in the first place, no matter what the judge decides in #2 above and even if the debt is a “community” debt.
4. The Texas Constitution prohibits a person being imprisoned for debt. If the person ordered to pay a debt in a divorce decree does not pay, the legal remedies are scant, to say the least, and costly for sure.
5. If your spouse is ordered to pay debt standing in your name and does not pay, your credit will be adversely affected and there is nothing you can do about it.

What does this all mean to you if you are getting a divorce? If you owe debt standing in your name, DO NOT assume that because the judge ordered your spouse to pay it that it (1) will be paid or (2) you will have an effective legal recourse if it is not paid. Make a deal that includes having assets liquidated to pay off the community debt or in which you take more of the community assets in return for taking community debt standing in your name. And, most importantly, hire a good family law attorney that will pay attention to this very important part of your divorce.