Isn’t Divorce Bad Enough?
What you Must Know About Divorce and your Credit.
Let me set the scene. Phone rings and I answer it with a happy “HELLO” as the caller ID shows a sweet friend of mines name. Brief were the salutations as her immediate and urgent purpose of the call had to come out. “ Kim, I want to clean up some old credit issues that I’ve been ignoring for some time (10 years to be exact) and I know you are the Credit Gal and wanted to come to you first my friend.” Such sweet words to my ears as it is always our hope that our closest friends and family would come to you first, although it is often not the case! She plunged into her story about the judge who so kindly granted her all their debt as a couple in the divorce decree. OUCH!
I know all the men reading this right now are saying to themselves that this can’t possibly be a true story, but it is! I myself was lucky that my divorce didn’t go that route as it so easily could have based on the laws of the state.
Divorce involves many complicated issues, such as support, alimony and property division. But who gets custody of YOUR good credit? Or in some cases, the BAD credit!
Divorce can prove to be both financially and emotionally stressful. For some it truly creates that spiraling effect that leads down the dreaded road of denial.
If you find yourself faced with a divorce, it is important to start planning your financial future now. Follow these 10 steps to help maintain your good credit when going through a divorce:
- Know your current credit and debt situation. Obtain copies of your credit reports as well as your spouse’s credit reports. Make a list of all debts and decide who is responsible for each account.
- Have a plan. Your divorce decree should state what will happen (frozen assets, wage garnishment, etc.) if your spouse stops making payments. Make sure you have quick legal recourse if your spouse stops paying, and ensure your ability to make those payments yourself if necessary.
- Open a checking and savings account in your name only.
- Get a least one individual credit card and utility in your name only.
- Pay off all debts. Sell or refinance your house or other assets to cover outstanding debts, if necessary.
- Close joint accounts. Request that joint accounts be placed in the responsible party’s name only as an individual account. If joint accounts cannot be reverted to individual accounts, then freeze joint accounts and tell the creditor that you will not be responsible for any more charges after that date.
- Remove all authorized users from your individual accounts – that especially means your spouse and his or her family members. Authorized users are nto obligated to pay back any charges they make.
- Don’t stop paying the bills. Keep making regular payments during the divorce process.
- Don’t wait until you’re in a crisis situation. Get your financial situation in order before you file for divorce.
- Contact your creditors. Your creditors are not a party to your divorce decree and are not legally bound by it. If your spouse fails to make a payment for a joint account, the creditor can and will pursue you for the money; it also will appear on your credit report. However, the creditor may enter into a separate payment arrangement with you or take your name off an account.
- Creditors are not required to change joint accounts to individual accounts. A creditor may require you to reapply for credit on an individual basis or refinance a mortgage in order to remove one spouse from the loan obligation.
- Get all agreements with creditors in writing. Make notes of all phone calls including names, dates and the topic of conversation. Don’t have your name removed from any title if you are still responsible for the loan.
- Divorce is difficult even under the best of circumstances. Pay attention to credit issues before a divorce, and you can make the divorce process easier and relieve much of the stress.
Who’s Responsible For What?
You are responsible for paying any debt in your name, whether you are married or not. If you live in a community property state, both you and your spouse may be responsible for debts incurred while married. Individual debt of one spouse may appear on both your credit report and your spouse’s credit report.
Both you and your spouse are responsible for paying the debt. This is true even if your divorce settlement states that one person will be responsible for the debt. Joint debts are reported to credit bureaus in both names.
You may authorize another person to use an individual account in your name, but you are responsible for the entire debt. If you are an authorized user on another person’s account, you are not liable for the debt. However, the debt still may appear on your credit report.
- If you know that you may be faced with an upcoming divorce, take action on the 13 items above. Do not postpone as the more you are prepared the easier it is for all.
- If you are one of the lucky ones, please share this article with your friends that may be facing this outcome and put them in touch with me.
- If you have already gone through divorce and it is too late to take the actions above, and you need assistance with getting control of your debt, protecting what you have left and/or fixing credit issues. Please email me at Info@CreditGal.CO for a private consultation.
I highly recommend that you also check out all that is available to you in our “FES Protection Plan” membership. There is no cancellation fee. Go to www.CreditGalKim.com and select “Products” and then select “Protection Plan” to view all that is available to you.
As always, if you have errors on your credit reports or items that do not belong to you and you are not having success getting them removed, contact me for help.
For questions or additional resources, please contact me at Info@CreditGal.CO