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credit card debt

Credit card debt often plays a significant role in divorce—both as a factor in the cause of the divorce and as an obstacle to dissolving the marriage, as responsibility for the debt must be agreed to by the divorcing spouses or determined by the court.

If the spouses live in a community property state (as opposed to a common law property/equitable distribution state) and the credit card was applied for and issued to only one of the spouses, the bank may only be able to seek payment from the spouse in whose name the card was issued and the credit was extended—but in resolving the divorce case, the court (judge) may order community property sold to pay the credit card debt, or may order the other spouse to pay the credit card debt. Community property states generally include Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.

In Texas, which is a community property state, credit card debt incurred during the marriage is typically considered the joint responsibility of both spouses, regardless of whose name is on the credit card. This means that during a divorce, the court will generally divide all marital debts, including credit card debts, between the spouses. The division is not necessarily equal but is supposed to be just and right, considering the circumstances of the case. If a credit card was issued in one spouse's name, the creditor may initially seek payment from that individual, but the court may still order the debt to be paid from community assets or by the other spouse as part of the divorce settlement. It's important to note that the way credit card debt is handled can vary depending on the specific facts of the case, and an attorney can provide advice tailored to an individual's situation.

Texas Statutes & Rules

Texas Family Code, Title 1, Subtitle C, Chapter 7, Subchapter A, Section 7.001 - Division of Property
This statute is relevant because it outlines how property, including debt, is divided upon divorce in Texas, a community property state.

In a suit for dissolution of a marriage or in a decree of divorce or annulment, the court shall order a division of the estate of the parties in a manner that the court deems just and right, having due regard for the rights of each party and any children of the marriage. This includes both assets and liabilities such as credit card debt. The court may consider factors such as the disparity of earning potential, benefits which the party not at fault would have derived from continuation of the marriage, and the nature of the property involved.

Texas Family Code, Title 1, Subtitle C, Chapter 3, Subchapter E, Section 3.202 - Liability for Debts
This statute is relevant as it addresses the liability of spouses for debts, including credit card debt, in a community property state like Texas.

Each spouse is personally liable for their own acts and for any debts incurred by them. However, in a community property state, a spouse may be liable for the debts of the other spouse only to the extent of the community property. This means that while a credit card issued in one spouse's name may initially be the responsibility of that spouse, the court may ultimately decide to use community property to satisfy the debt.

Texas Family Code, Title 1, Subtitle C, Chapter 3, Subchapter D, Section 3.102 - Community Property
This statute defines what constitutes community property in Texas, which is relevant to how credit card debt may be divided in a divorce.

Community property consists of the property, other than separate property, acquired by either spouse during marriage. This includes income earned by either spouse and property acquired with that income. Debts incurred during the marriage are generally presumed to be community obligations, which means that credit card debt acquired during the marriage may be considered community property and subject to division upon divorce.

Texas Family Code, Title 1, Subtitle C, Chapter 3, Subchapter F, Section 3.301 - Management of Community Property
This statute is relevant as it discusses the management of community property, which includes the responsibility for debts such as credit card debt.

During marriage, each spouse has the sole management, control, and disposition of the community property that they would have owned if single, subject to certain restrictions. This includes the ability to incur debt that may be considered community debt. However, in the event of a divorce, the court may take into account the way in which the spouses managed their community property when dividing assets and liabilities.

Federal Statutes & Rules

Fair Credit Billing Act (15 U.S.C. §§ 1666-1666j)
This federal statute is relevant as it provides a mechanism for addressing billing errors on credit card accounts, which can be a point of contention in divorce proceedings.

The Fair Credit Billing Act (FCBA) is part of the Truth in Lending Act and provides consumers with the right to dispute charges under certain circumstances and provides a process for resolving credit billing disputes. It requires creditors to acknowledge consumer billing complaints promptly and to investigate billing errors. The FCBA also provides protections against unfair billing practices and requires creditors to correct errors on credit card accounts. This can be particularly relevant in a divorce context if there are disputes about which spouse made certain charges or is responsible for them.

Truth in Lending Act (15 U.S.C. §§ 1601-1667f)
This statute is relevant as it sets forth the requirements for credit card issuers in terms of disclosure, which can affect how credit card debt is handled in a divorce.

The Truth in Lending Act (TILA) requires lenders, including credit card issuers, to provide consumers with clear and conspicuous disclosure of the terms and conditions of credit, including finance charges and other costs. TILA also includes provisions for consumers' right to cancel certain credit transactions that involve a lien on a consumer's principal dwelling, provides a means for fair and timely resolution of credit billing disputes, and regulates credit card practices. It can impact divorce proceedings by clarifying the terms under which credit was extended to one or both spouses, which may influence a court's decision on debt responsibility.

Equal Credit Opportunity Act (15 U.S.C. §§ 1691-1691f)
This statute is relevant as it prohibits discrimination in any aspect of a credit transaction and may affect how credit was extended to spouses, which can be a factor in divorce-related debt disputes.

The Equal Credit Opportunity Act (ECOA) prohibits creditors from discriminating against any applicant on the basis of race, color, religion, national origin, sex, marital status, age, or because they receive public assistance. This law ensures that all consumers are given an equal chance to obtain credit, which can be relevant in a divorce if there is a question of whether credit was extended or denied to a spouse unfairly or in a discriminatory manner. In the context of divorce, this may affect the determination of whether both spouses had equal access to credit and could influence the division of credit card debt.

Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (11 U.S.C. §§ 101-1532)
This statute is relevant as it outlines the bankruptcy process, which may be an option for one or both spouses in managing credit card debt during or after a divorce.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) reformed the bankruptcy code and made it more difficult for consumers to file for Chapter 7 bankruptcy, which allows for the discharge of debts. It requires individuals to receive credit counseling before filing for bankruptcy and to complete a financial management instructional course after filing. In the context of divorce, if one or both spouses are considering bankruptcy as a way to manage credit card debt, this act outlines the process and requirements for filing, as well as how debts may be treated in bankruptcy proceedings.