Most married couples in Colorado use credit cards regularly. Some households pay off credit card balances every month, while others may have thousands of dollars in credit card debt. Those debts can become a point of contention during a Colorado divorce.
State equitable distribution rules apply to both financial obligations and marital resources. For example, credit card debts accrued during the marriage are often subject to division. Both joint accounts and cards held by one spouse only are potentially part of the marital estate.
How can people address their credit card debt during Colorado property division negotiations?
Taking on more debt to keep more property
There are many different ways to balance the value of assets that spouses retain during a divorce. Sometimes, accepting responsibility for marital debts can offset the value of the resources that someone decides to keep when they divorce. Someone asking to keep a vehicle or reduce how much home equity they withdraw for their spouse might use credit card debt as a way to justify keeping a larger share of the marital property.
Splitting the accounts as evenly as possible
Married couples often use multiple different credit cards to cover regular household expenses. Sometimes, each spouse agrees to accept responsibility for specific accounts based on their overall value or on personal spending habits. This approach can seem like the fairest, but it does have certain drawbacks. If either spouse defaults on a line of credit where both spouses co-signed, the other could be at risk of collection activity despite the order from the family courts. Neither credit card companies nor the civil courts prioritize family court orders over the documents signed when opening a new line of credit.
Paying the debts with marital assets
For some couples, the simplest solution for credit card debt is to eliminate it during the divorce. They use marital assets, ranging from savings accounts to home equity, to pay off their credit card debt. That way, neither spouse has to worry about the other defaulting on their responsibilities. The spouses can divide what remains of the marital estate after paying those debts.
When spouses arrange their own property division settlement, they have control over those details. Otherwise, the division of debts and assets occurs at the discretion of the judge hearing the divorce case. Considering every viable solution may help people resolve property division challenges more effectively as they prepare for a Colorado divorce.