Divorce is painful enough without it resulting in a damaged credit history that will haunt you for years to come. Yet, that’s often what happens to individuals who don’t take the proper steps to protect their credit before, during and after divorce.
Many divorcing individuals believe that if they can get their joint debts assigned to their spouse in the divorce decree, they no longer have to worry about them. That’s not the case! I can’t tell you how many people I’ve spoken with over the years who have found their credit ruined because their ex fell behind on joint accounts assigned to them in the divorce decree.
Your divorce decree is an agreement between you and your spouse, and does not erase the original agreement with the lender. When you opened your joint accounts, you agreed to be responsible for any charges made on the account. Therefore, you must continue to be concerned about any joint accounts until they are closed and paid off.
Your best option is for you or your ex to pay off or refinance any joint accounts in the name of the person who is taking on responsibility for the balance as part of the divorce settlement. That’s not always possible. If neither of you can afford to pay them off and can’t qualify for a new loan to refinance them, make sure you close the account to future charges. Let your spouse know that you are closing the account. Then send a certified letter to the creditors asking them to close the account. Keep a copy indefinitely for your records.
If you must go this route, be sure you monitor payments on any joint accounts each month to check whether they are paid on time. In many cases, you can go online to review the account history each month. If they are not being paid promptly, you may need to consider paying them to keep your credit record clean, then go after your spouse for reimbursement. Of course, you’ll want to discuss this situation with your attorney.
If your spouse files for bankruptcy and includes your joint debts, the creditors may look to you for payment. That’s another good reason to protect yourself early by insisting that joint accounts be refinanced or paid off at the time of divorce.
Late payments remain on your credit for seven years, and can be a painful reminder of your divorce. Take steps now to minimize the damage so you can truly put the past behind you.
Gerri Detweiler is the author of The Ultimate Credit Handbook, host of EverydayWealth Radio: Your Consumer Advocate, and credit expert for EverydayWealth. To learn more secrets to protect your credit and finances before, during and after divorce visit www.DivorceMoneyHelp.com.
Certified Divorce Financial Analyst
Business Valuators / CPAs