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Credit Card Debt And Divorce In Illinois
There are many kinds of debt that people can hold when they are going through a divorce: home mortgages, auto loans but the most common is credit card debt. Credit card debt can be in one spouse’s name or both spouse’s names but either way it must be addressed in a divorce to determine who is responsible for what. So, what happens to credit card debt in an Illinois divorce?
In an Illinois divorce, debt is treated exactly the same way as assets are for the purposes of division or ownership and responsibility.
“”marital property” means all property, including debts and other obligations, acquired by either spouse subsequent to the marriage” 750 ILCS 503(a)
Marital Debt vs. Non-marital Debt
Any debt incurred post marriage and pre-divorce is marital debt and is, thereby, possible to divide in an Illinois divorce.
This means that a credit card in one spouse’s name that the other spouse didn’t even know about can be a marital debt so long as the debt was incurred during the marriage. The other spouse could then be responsible for some or all of that debt because the debt is “marital” in nature.
Some types of debt are inherently non-marital and thus non-divisible in a divorce. This means that a non-marital debt will stay in the debt holder’s name after the divorce.
The Illinois statute refers to debt as “property” so the statute seems confusing to the layperson. So, I’ve reposted the statute as it pertains to non-marital debts except I’ve replaced the confusing word “property” with the word “debt” and highlighted the difference.
In an Illinois divorce non-marital debt can be:
“(3) debt acquired by a spouse after a judgment of legal separation;
(4) debt excluded by valid agreement of the parties, including a premarital agreement or a postnuptial agreement;
(6) debt acquired before the marriage…
(6.5) all property acquired by a spouse by the sole use of non-marital property as collateral for a loan that then is used to acquire property during the marriage; to the extent that the marital estate repays any portion of the loan, it shall be considered a contribution from the marital estate to the non-marital estate subject to reimbursement;
(7) the increase in value of non-marital debt…” 750 ILCS 503(a)
Debt is a lot more clear cut than assets as to whether the debt is marital in nature or not. Debt gets paid off. Debt doesn’t accumulate into more and different kind of debts…usually.
Once a debt is considered marital, an Illinois divorce court may divide the responsibility for that debt “equitably.” This means the debt will not be divided 50/50 but, rather, will be divided any way the court deems to be fair to both parties.
In lieu of dividing credit card debt, the court does have the power to allocate the credit card debt exclusively to one party under certain conditions. “Where one party is substantially responsible for the creation of the debt and has a substantially greater capacity to earn money, it is not an abuse of discretion for the trial court to assign the overwhelming majority of debt to that party.” In re Marriage of Werries, 247 Ill. App. 3d 639, 649-51 (1993)
Credit Card Debt After Separation or Filing For Divorce in Illinois
The Illinois statute says that debt acquired after a legal separation is non-marital. The statute makes no accommodation for any debt acquired after the parties move apart (separate) or file for divorce. In fact, those debts after physical separation and filing for divorce still fall into the category of marital debt per the statute.
In my experience, Chicago divorce judges do not treat post-separation credit card debt as marital. Chicago divorce judges typically ask for a credit card statement at the date of separation or filing and consider the amount on the date of filing or separation as the amount of marital debt.
Dissipation of Assets And Credit Card Debt In Illinois
A provision of the Illinois statute says that money spent for a non-marital purpose shall be accounted for when dividing up the marital assets and debts.
This means that money spent on drugs, alcohol, gambling and paramours is effectively given back to the innocent spouse (at least the share they would have gotten had that money not been spent for a non-marital purpose).
Any spending after separation or filing for divorce is almost by definition for a non-marital purpose. So, if there are fears that post-separation credit card debt will be divided, a notice of dissipation regarding those debts should be filed in your Illinois divorce case.
How To List Credit Cards On Your Final Divorce Documents
When you are referring to the credit cards in your final Marital Settlement Agreement, you must not put the credit card number in ANY of the court documents.
“In civil cases, personal identity information shall not be included in documents or exhibits filed with the court“ Illinois Supreme Court Rule 138(a)
“Personal identity information, for purposes of this rule, is defined as follows:
(4) debit and credit card numbers.” Illinois Supreme Court Rule 138(b)
“A redacted filing of personal identity information for the public record is permissible and shall only include:
(4) the last four digits of the debit and credit card number.” Illinois Supreme Court Rule 138(c)
Typically, writing “The American Express card in Petitioner’s name ending in x2576” is sufficient to appropriately identify the credit card debt you are allocating.
Practical Considerations Regarding Credit Card Debt In An Illinois Divorce
It is terribly difficult to actually divide an individual credit card debt in a divorce.
It is not enough for the marital settlement agreement to say “each party is responsible for 50% of the American Express charge.” A final divorce decree has to include details of how that debt is to be paid, minimum payments must be met, etc. This is almost always impractical.
The solution is for each party to a divorce to take responsibility for individual credit cards. The credit cards total debt each party is responsible should be approximately equal. If the balances of the credit cards are unequal, the party with the lesser debt can simply pay an equalizer to the other party.
For example. Charlie and Lucy have three credit cards with balances of $ 10,000, $ 5,000 and $ 3,000, respectively. Charlie takes the credit card with the $ 10,000 balance while Lucy takes the two cards with the $ 5,000 and $ 3,000 balance. So, Charlie is responsible for $ 10,000 debt and Lucy is responsible for $ 8,000. Lucy should then pay Charlie $1,000 out of her award of the marital assets so that the balances of the debts are then conceptually $9,000 a piece.
Alternatively, one party can transfer some or all of a credit card balance to the card they’re responsible for in order to equalize the debts.
If the cards are held in both parties names, the party responsible for the credit card debt must agree that “the party shall be responsible for all payments associated with the credit card debt and indemnify and hold harmless the other party therefrom.”
If the party responsible for the credit card debt misses a payment, the other party can go back to the divorce court on a motion to enforce the agreement and a petition to hold the other party in contempt for willfully violating the agreement. A finding of contempt entitles the filer to recover any attorneys fees that were incurred in enforcing the order.
As you can see, dividing credit card debt in an Illinois divorce is exceedingly complicated and thankfully, there is a simple and easy alternative as you’ll see below.
The Real Solution To Credit Card Debt In An Illinois Divorce
Credit Card debt typically has an interest rate between 4.9% and 19.9%. Any financial advisor would tell someone that their first financial priority should be to pay off their credit card debt which is effectively a high-interest loan.
In a divorce where assets and debts are divided, the most financially sound decision is to determine the liquid marital assets (money in accounts) and the marital credit card debts. Then, the liquid marital assets should be used to pay off the marital credit card debts.
Paying off credit card debt with marital assets means credit card debt is eliminated and no one has to indemnify anyone else or arrange for some kind of complicated pay-off scheme.
You can even ask an Illinois divorce court to enforce the sale of marital assets in order to pay off marital credit cards under the statute. “The court may make such judgments affecting the marital property as may be just and may enforce such judgments by ordering a sale of marital property, with proceeds therefrom to be applied as determined by the court.” 750 ILCS 503(i)
Who Pays The Credit Cards During An Illinois Divorce?
During an Illinois divorce the couples’ credit cards still need to be paid. There is no automatic rule as to who is supposed to make those minimum credit card payments. Hopefully, credit cards get paid off from the liquid marital assets as described above.
But, any party can file a motion to maintain the status quo or allocation of marital funds to pay the credit card payments as they were paid during the marriage.
Failing that, one party can merely file for bankruptcy and wipe out the credit cards as to themselves, personally.
It’s important to note that not everyone can qualify for bankruptcy. One has to pass the means test and needs to have a debt of a certain amount to be eligible for bankruptcy. Hence it’s best to explore all other debt relief programs for paying off credit card debt.
Credit Card Debt As An Alternative To A Motion For Temporary Support
After a separation, one party may have complete control of the finances. The spouse that controls the finances may cut the other spouse off from access to bank accounts or other sources of funds the spouse used to pay for typical expenses.
Sometimes it takes two weeks to two months for a motion for temporary maintenance to be heard by an Illinois divorce judge. In that time period, the spouse petitioning for temporary support can pay their expenses via credit card and that credit card debt will become marital debt to be divided at the end of the divorce like any other marital debt.
Can I Pay For My Divorce Lawyer With A Credit Card?
You sure can! All divorce lawyers take credit cards. Your attorneys fees if put on a credit card are always considered a marital debt even if it’s post-separation or post-divorce filing.
Furthermore, you may even be reimbursed that money spent on attorney fees via a Petition for contribution for attorneys fees. But, it’s more likely that the credit card debt you incurred to pay attorney’s fees will be divided equitably by the court like any other debt.
If you have credit card debt and are considering divorce, contact our office to speak with an experienced Chicago divorce lawyer about what your options regarding debt and assets in an Illinois divorce.