Money & Divorce: How to Handle Joint Bank Accounts, Credit Cards, Health Insurance

  1. How much does divorce cost?

The cost of getting a divorce depends on many components, and there’s no definitive answer at the beginning of the process. A determining factor is whether the divorce is contentious or not. The more contentious the divorce, the more time it can take to come to agreement over issues. Contested issues are often alimony, child custody and support, and division of marital property and debt.

The cost of divorce includes attorney’s fees, filing fees, and experts such as child custody evaluators and financial analysts. Each party in the divorce typically hires their own lawyer to help them through the process and look out for their best interests. Your lawyer will have to spend time collecting financial documents and other legal information, negotiate a settlement agreement, and possibly prepare motions and represent you in hearings and a divorce trial. Lawyers typically charge by the hour.

  1. How should we handle our joint bank accounts?

Joint bank account holders share equal ownership of the account. The contents are considered marital property, and usually would be distributed equitably in the divorce settlement.

Because either owner can deposit or withdrawal money without the other’s permission, it’s always best to confer with your lawyer to come up with a plan about how to handle joint accounts, and what actions to take.  You’ll want to segregate joint accounts, split them in an equitable manner, and keep everything separate from the point you separate going forward.

The most ideal scenario would be to close the account together, split the funds, and open new accounts in your own names. If you’ve got an uncooperative spouse, however, contact your lawyer for next steps.

You may also ask your lawyer to contact the bank to request that the account be frozen until the courts are involved. It would ensure that neither spouse is liquidating the marital estate, and that everything is safely protected until the divorce is final. This may require a court order, as well.

  1. How do we handle credit card debt?

Both parties are responsible for debt accrued during the marriage, regardless of who incurred it.  If you have joint credit cards, it’s best pay off any balances and cancel them, or transfer them into one spouse’s name, if possible.

If you can’t pay off the balance right away, it’s a good idea to notify the credit card company, in writing, of the pending divorce, and request that once you’ve paid off the balance, the account be closed.

If you don’t take action on your joint credit cards, you’ll still share the responsibility for any new debt your ex-partner may accrue with the credit card company, even if this debt is not considered “marital.” This could also negatively affect your credit score – if you incur more debt, it can lower credit scores. This is true for mortgages and lines of credit, as well.

Make sure to establish a credit card solely in your name, especially for emergencies and for establishing credit on your own. Remove your spouse as an authorized user on any of your cards, if possible.

  1. Will I lose my health insurance/benefits right away?

If one spouse is carrying the health insurance for another, it’s illegal for that spouse to drop the other, or the children, during the separation or divorce proceedings. The PA Support Code and the Divorce Code protect the non-insurance carrying spouse from this action. If this happens, the spouse’s employer must restore the coverage when they are made aware of the error, if a court so orders.

If you have been dropped from your spouse’s health insurance coverage, it is important to seek the help of lawyer immediately to correct the situation and make sure you are covered.

Once the divorce is final, the dependent spouse will be removed from the health insurance policy provided by the spouse’s employer, and usually qualifies for a Special Enrollment Period (SEP) for health benefits, which lasts for 60 days, due to life event changes. Divorce is considered a qualifying life event. During this time the individual can enroll in whatever health insurance option makes the most sense.

Options for health insurance after divorce include obtaining your own policy or possibly continuing your current health insurance through COBRA – the Consolidated Omnibus Budget Reconciliation Act – if it applies to the ex-spouse’s employer. COBRA generally applies to all private-sector group health plans maintained by employers that had at least 20 employees on more than 50 percent of its typical business days in the previous calendar year. It also applies to plans sponsored by state and local governments. COBRA allows eligible individuals to extend coverage temporarily under their ex-spouse’s employer’s plan, at their own expense, for up to 36 months (sometimes 18).

COBRA is known to be expensive, however, and there may be more cost-efficient alternatives. One of those is to explore healthcare plans offered by your current employer, or you can also shop for various plans on your state exchange, the federal marketplace, or in the private marketplace.

If you are considering filing for divorce in Pennsylvania, give the team at Susan Levy Eisenberg, Attorney at Law a call today. As one of Bucks County’s and Montgomery County’s premier Matrimonial Law attorneys, Susan and her team have served the area with three decades of distinguished divorce negotiation and representation