First comes love, then comes marriage . . . then come the high-profile divorce lawyers and the division of assets.
That’s the way it goes in Hollywood these days anyway, with another celebrity divorce making headlines nearly every week, it seems. This past week brought news of a big split that most media didn’t see coming, with Katie Holmes filing for divorce from Tom Cruise in New York City on Friday.
There are many issues to resolve when a couple splits up, and a lot of details to wrap up. One of the things many people might not think about is what to do with joint credit card accounts. Who owns the debt on the marital credit cards? If one spouse had a card prior to the marriage and added their husband or wife to the account later, are both of them responsible for the balance on the card?
We don’t know if Tom and Katie added each other to their American Express accounts, but on the occasion of their split, we can offer our expert Credit-Land.com advice to other couples (or ex-couples, as the case may be) faced with the same situation.
Show Me the Money
Michael Germanovsky, Editor-in-chief of Credit-Land.com says, “Here’s the scoop on this. Unlike bank accounts, which can be jointly held, with credit cards there can only be one primary account holder. Anyone else is simply an authorized user. Debt incurred on the card is the responsibility of the primary cardholder.”
This doesn’t prevent one spouse from asking the other to be responsible for a share of any debt accrued during the marriage, but that would have to be negotiated by the divorce lawyer, says Germanovsky. If one spouse is ordered to pay part of the debt, they would be wise to use a balance transfer offer to open a card in their own name and transfer the portion of debt over. Doing so can even save money, if the new card has a zero-APR balance transfer offer.
All the Right Moves
What should divorcing couples do to ensure their credit scores don’t suffer and add to their burden during this time of transition? Germanovsky urges people to take the following steps:
· Order copies of your credit reports. It’s important to know what accounts you have open, whose name is on them, and how much debt, if any, is being carried by each party. Continue to monitor your credit score throughout the divorce process, so you know if anything unexpected pops up and can take care of it right away.
· Apply for a major credit card in your own name if your spouse was the primary cardholder on all your accounts. This is especially important for a spouse who is a stay-at-home parent; it can be difficult to get a credit card at all in this situation, but after the divorce is final, it may be even harder.
· Sit down and talk, preferably with a mediator present in case things get heated. Have a list of all loans and debts, how much is owed, who is listed as the primary cardholder, and what the interest rates are for each debt. Decide who will be responsible for which debts, and how you will split the debts, if needed.
· Update addresses and contact information for all credit card and bank accounts. If you are moving out of the marital home, make sure your new address is on file with your lenders and credit card companies. With email and cell phones, this is less of an issue than it used to be – those things will probably stay the same – but you still want to make sure you don’t miss any communications from your bank.
Stars: They’re Just Like Us
Okay, maybe they aren’t just like us. After all, rumor has it that young Suri Cruise has her own credit card. Still, seeing stars go through everyday turmoil like divorce can make the rest of us feel a little better when we have the same thing happen to us. Tom and Katie may not be in debt, but they will still have their work cut out for them splitting their assets.
So far, there is no word on who will assume responsibility for Suri’s credit card.