During a divorce in Michigan, many people will focus on their property or their arrangements for any children that they share with their spouse. Although it is quite common for married couples in Michigan to have shared financial obligations, including joint credit cards, people often don’t think about their debt in the early stages of planning for or negotiating their divorces.
Those credit cards can then end up being a complicating factor that forces people to renegotiate certain details of their proposed property division agreement. What typically happens to shared credit cards in Michigan divorce?
Joint accounts will need to be closed
It is common for spouses and the courts to close and freeze accounts when someone initially files for divorce. Doing so helps prevent the dissipation of shared marital assets. This may mean that people are temporarily in a crunch without revolving credit.
Spouses have to divide the debt
Just like people have to work out a solution for sharing their property, they will also need to divide the debts owed, including their credit card debts. Not only are the accounts that have the spouses as cosigner subject to division, but technically any debt accrued during the marriage could impact the property division settlement even if the account is in the name of only one spouse.
Spouses may also need to consider any accrued but unredeemed credit card rewards as an asset in their divorce, as such benefits could be worth thousands of dollars. One spouse could accept more of the debt because they spent more and have a higher income, or the spouses might use shared resources to pay off their shared debts.
Making sense of how equitable distribution works in Michigan may benefit those preparing for divorce.