The Law offices of Arnold & Smith - John Price Carr House
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What Happens in Divorce When One Spouse has Significant Debt?

Has your spouse taken on significant credit card debt during your marriage? If you are considering divorce in Charlotte, you may be worried about having to pay off your spouse’s credit card debts. When couples cannot agree on how to divide their marital assets, a North Carolina court will divide up their assets and debts using the equitable distribution law. The law requires judges to divide up marital property equally between the two spouses. However, when doing so would not be fair, judges can divide up the marital property as they see fit. Courts look to multiple factors listed in the equitable distribution law to decide whether or not they need to divide the property in half.

Who Pays for Credit Card Debt in a North Carolina Divorce?

The average American family has over $15,000 in credit card debt. In September 2019, credit card balances hit $443.96 billion. In the last five years, credit card debt has increased by 6% in the United States. Many if not most divorcing spouses in North Carolina have credit card debt. In addition to dividing up the marital assets, North Carolina courts will also divide up the marital debt. The division of credit card debt is often just as important as dividing up assets in a divorce. There are two ways in which credit card debt becomes divided into a North Carolina divorce.

Dividing Up Credit Card Debt in a Separation Agreement

The first way to determine which spouse will pay the credit card debt is for the spouses to voluntarily decide how to divide up the debt. Divorcing spouses have the right to create their own separation agreements. A separation agreement is a legally binding contract between a divorcing husband and wife. A well-written separation agreement will address all of the important issues in a divorce. Separation agreements will address child support, child custody, the division of marital property and the division of marital debt.

Division of Marital Debt by a North Carolina Court

If two spouses cannot come to an agreement regarding how to divide the credit card debt, a North Carolina court divides up the property. When two spouses are already separated and do not have a prenuptial or postnuptial agreement, the court will divide up assets based on equitable distribution. North Carolina judges use the North Carolina equitable distribution law to divide up assets and debts. The law requires judges to split marital property and marital debt equally unless doing so is not equitable. If a court decides to split the marital property equally, one spouse would be responsible for paying half of the debt and the other spouse would be responsible for half. Courts look at multiple factors to determine how to divide up marital property.

Can a North Carolina court require one spouse to pay all of the credit card debt? Yes, the equitable division of property law allows courts to divide up marital debt unequally when fairness requires doing so. Courts consider the income, property, and liability of both spouses. When a spouse presents evidence that the other spouse purposely charged significant amounts of credit card debt, a judge may require that spouse to take on the debt after the marriage.

Judges will likely consider when the spouse charged the debt, how much debt the spouse charged, and whether or not both spouses knew about the debt. What if one spouse repeatedly asked the other spouse to stop increasing their credit card debt and the other spouse refused? In this case, a North Carolina judge is likely to be more sympathetic to the spouse who did not accrue the credit card debt.

Marital Misconduct and Credit Card Debt

When one spouse engages in reckless misconduct during the marriage, the other spouse can seek an injunction. Reckless misconduct that hurts the value of the marital estate includes reckless spending using a credit card, wasting assets, or hiding financial assets from the other spouse. Selling a marital property for prices below their fair market value is also considered marital misconduct. When this happens, a spouse can request the court to stop the offending spouse from the misconduct through an injunction. Courts may also require a bond or assurance to protect the interest of the non-offending spouse.

Our Lawyers can Help

If you are facing a divorce and your spouse has a significant amount of debt, our lawyers can help. Speak with our detail-oriented and well-versed lawyers in or around Charlotte, Lake Norman, or at our office in Monroe, please contact Arnold & Smith, PLLC today at 704.370.2828.