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Stopping the Financial Bleeding of Credit Cards in a Divorce

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It is pretty well established that financial problems and stresses are one of the chief causes of divorce. In many cases, the financial issues are caused by both spouses. In others, it is only one of the spouses that is running up the debt of the family.

Community Property Means Community Debt
Many falsely assume that filing for divorce will stop the other spouse from continuing to accrue debt to the family. Because New Mexico is a community property state, this means that the innocent party will suffer the consequences of the financial irresponsibility of the other spouse unless he or she does something to protect him or herself.

When a divorce is filed in New Mexico, a Temporary Domestic Order (TDO) is entered. One thing the TDO is meant to do is to protect the spouses financially. The TDO basically orders the parties to maintain the status quo. For purposes of finances, this means neither party will run up the debt or begin exhausting or moving assets.

Though it does prohibit the parties from running run up debt, it does not provide much real protection to the innocent spouse where the other simply cannot control his or her spending. The innocent spouse is likely equally liable for the debt since it was incurred during the marriage. Worse yet, even if Marital Settlement Agreement or other court order allocates the debt to one or the other parties, it is not binding on third party creditors.

Though it can apply to any community debt, the problem comes up most frequently with credit card debt. As such, credit cards will be the focus though the same concepts would apply to other debt.

Terms of Divorce Not Binding on Creditors
Again, neither a court order nor Marital Settlement Agreement is binding on credit card companies. Though both may be enforced by the court in theory, actual enforcement of provisions can be very difficult and time consuming. It can take months to even get to court the first time and unfortunately these issues are rarely resolved if at all at the first hearing. As such, it can also be quite expensive in terms of attorney fees and costs. This is unfortunate since this is perhaps the worst possible time for incurring new expenses for the innocent spouse.

Steps to Protect the Innocent Spouse
Though the innocent spouse cannot really completely protect him or herself from community debt incurred prior to filing for divorce, there are some simple steps to protect against additional financial bleeding.

First, if possible, cancel the credit cards. This sounds easy enough. But remember the TDO which may disallow it. Therefore, it is best to get a court order to this effect.

At the very least, you should put the credit card company on notice in writing delivered by certified mail and faxed so there is a transmission report. Make it clear that you are no longer financially responsible for the card and that you want your name off the card. Insist on a written response and be persistent in getting one.

If neither of these options solves the problem, you may need to file for bifurcation of the divorce proceedings. This means splitting the divorce up by immediately issuing the divorce while continuing to resolve the financial issues.

There are not a whole lot of good reasons for seeking a legal separation instead of divorce. This is one good reason. If none of the above is available, then you may need to file for legal separation which will end the community property status of the marriage. This will prevent any new debt being incurred against the community following the final order of legal separation.

Act Quickly!
These are difficult issues to address. They need to be addressed quickly and decisively where present. Recovering from a divorce can be difficult in many ways. The debt run by your spouse following the filing for divorce does not have to be among them.

DISCLAIMER

Related Reading:
Community Debt After Divorce – Few Remedies to Protect Yourself After the Fact!
Division of New Mexico Community Property: Agreement on Method Can be the First Hurdle
A Division of Community Debt in Divorce Proceedings Provides Little Relief from Creditors

Collins & Collins, P.C.
Albuquerque Attorneys

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