Recently, a client of mine came into my office and was extremely upset because her ex-husband filed for bankruptcy and a joint credit card they had while they were married is now trying to collect the debt from her. Sound familiar? Her divorce attorney entered into a settlement agreement in which the husband was to be liable for this debt. It was over 10 years since their divorce and the husband incurred even more debt on that card in the last 10 years so how can be coming after her?
The short answer is someone did not execute on the settlement agreement properly. When an a settlement agreement is entered into in a divorce regarding liability on a debt, someone must make the ex-husband close that credit card out and reissue a new card. Especially, when the card was a joint card or if the spouse was listed as an authorized user, the spouse that is no longer liable is still going to be held liable by the credit card company. You must understand that the credit card company does know that the spouse should no longer be liable on the debt because they are not part of the divorce proceedings. So, if the ex-spouse or in my example the ex-husband does not close out the current card and open a card only in his name, the ex-spouse or ex-wife will still be deemed liable on the debt even years after the divorce.
Well, you heard of death do us part well it really should be debt do us part in a divorce proceedings sometimes. How to prevent all of this from happening is that you should always look at your credit report. Especially after a divorce and your ex-spouse is liable on credit card debt, you need to ensure that those accounts are off your credit report and no longer being reported on your credit. Additionally, you should make sure your divorce attorney confirms with your ex-spouse’s attorney that they executed on the close out of that account and issued a new account.
However, we know that sometimes things slip through the cracks and your freedom from your ex-spouse makes you forget about the details or following up on the details and you sprint from your ex-spouse does not permit you to slowdown and ensure the final step is complete. Also, client often think that someone else is going to do it and just convince themselves that it is in someone else’s hands and they will do it. I say this because it is often the line I hear when I ask why did you not review this before ten years passed. So what can you do if your ex-spouse was not forced to execute a new card being issued and its ten years later?
You can reopen the divorce case and force the ex-spouse to pay the bill. Even if the debt is discharged in a bankruptcy case, your ex-spouse is liable on the divorce contract or order of court to pay the debt. That is right—the debt survives the discharge of a bankruptcy. How so? The debt is discharged as to the creditor but not as to the spouse. The liability that the ex-spouse incurred was due to a divorce proceeding and not as a debt owed but a duty to take on the liability in exchange for something in return provided by the ex-spouse. Now, I do not want to confuse everyone with a property settlement in which money is promised to be paid to a spouse. If that is the case, the money is debt owed to a spouse and in some circumstances dischargeable.
Credit card payments and liabilities do not disappear with discharges. If this has happened to you, seek counsel’s advice to seek how to move forward with a licensed attorney in Maryland.