|
Divorce, Debt & Credit... Facts You
Need To Know
Michael Killian
Before a divorce, during a
divorce, and after getting a divorce you need to concern yourself with
credit... credit establishment, credit files and credit scores. Though
divorce and credit is a concern for both men and woman, woman tend to
have the greater credit difficulty due to societal standards. Therefore,
I encourage woman of any age or marital status to learn as much as
possible from this and other articles.
But for all men and woman, essential credit and financial matters must
be addressed when contemplating a divorce in order for either and/or
both parties to fiscally survive. Even if legally divorced, until
finances are divorced, there is still a partnership as will soon be
apparent.
Here are some key points concerning credit that should be dealt with.
Joint Accounts - Joint Responsibility
The Federal Trade commission says: "If you're considering divorce or
separation, pay special attention to the status of your credit accounts.
If you maintain joint accounts during this time, it's important to make
regular payments so your credit record won't suffer. As long as there's
an outstanding balance on a joint account, you and your spouse are
responsible for it."
If you divorce, you may want to close joint accounts or accounts in
which your former spouse was an authorized user. Ask the creditor to
convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in
marital status, but can do so at the request of either spouse. A
creditor, however, does not have to change joint accounts. The creditor
can require you to reapply for credit on an individual basis and then,
based on your new application, extend or deny you credit. In the case of
a mortgage or home equity loan, a lender is likely to require
refinancing to remove a spouse from the obligation.
SPECIAL NOTE: any time you open an individual account, you may authorize
another person to use it. A creditor who reports (good or bad) credit
history to a credit bureau, will report it in the file of any person you
have named as "authorized user" as well as your own file.
BEWARE - Defaulting on a Joint Account
Regardless of any court decision, if one joint account holder defaults
on a loan, I guarantee the creditor will not care who the court ordered
to pay it. The creditor will definitely come after the other joint
account holder. Even if declaring bankruptcy, a creditor will make every
effort to reclaim their lost revenue or property from the surviving
spouse.
Therefore be fully aware that if a creditor does not agree to transfer
joint accounts to an individual, then both of you are still responsible
for full repayment to the creditor, regardless of how you've agreed to
split the bills in the divorce settlement. If a spouse fails to make a
payment, a creditor will come after the remaining joint holder,
regardless of any divorce agreement. Additionally both joint holders
will have negative comments on their credit file regardless of fault.
Experian Offers Tips
Experian says, "There are several ways you can prevent credit
obligations from making divorce more difficult - and reestablish your
own distinct credit lines after divorce occurs. You may wish to consider
the following:
Communicate with your ex-spouse. Make as clean a financial cut as
possible.
Communicate with your creditors. Decide which credit belongs to whom,
then ask each company and bank that extended you credit to transfer the
debt to the name of the person who will be responsible.
During divorce negotiations, keep your joint bills current, even if you
ultimately will have no responsibility for the debt. If you don't, your
creditors could become more reluctant to release one party from joint
liability.
Ask the credit grantor to remove your spouse's name as an authorized
user or close the joint account to additional charges.
If your spouse runs up large amounts of debt, you should cancel as many
of the accounts as possible. Inform all creditors, in writing, that you
are not responsible for these debts. This may not prevent them from
trying to collect, but it does show that you attempted to act
responsibly.
Upon your divorce settlement, you and your ex-spouse might consider
obtaining individual consolidation loans to cover your share of the
joint bills. Pay off the joint bills with your individual loans and
close all joint accounts. This helps ensure you'll be responsible only
for those bills you agreed to pay. It also will help you establish or
reestablish credit in your own name. "
Other Points To Ponder
During a divorce people rarely consider the impact on their credit, yet
the ramifications for failure to properly prepare for future credit can
be devastating. Here then is a checklist and summary for a potential
divorce in order to best protect your credit and rating.
Get a bank account in your name only.
Get at least one unsecured credit card in your name only. At a minimum
get a secured credit card but in your name only. (This should occur
whether divorcing or not.)
Ask to freeze any joint accounts with an outstanding asset or liability
(bank, credit card, loans, etc.) so that both signatures are required
before any transactions can be made.
Notify all creditors in writing (and call them) Document dates and who
spoken to:
Have joint accounts closed if a zero balance or if possible have the
account placed in the primary responsible party's name only;
Instruct all creditors that you want all authorized users removed except
the primary holder;
Inform all creditors you are not responsible for charges from that point
on if not in your name.
The primary party may have to re-qualify with the lender. This also
means whoever will be responsible for a mortgage will probably have to
refinance in order to remove the secondary party's responsibility.
Get copies of your 3 credit reports and inform all credit bureaus when
the divorce is final. Make every effort to separate your credit file
from that of your former spouse.
MyVesta and Divorce.net
MyVesta.org adds the following great suggestions:
"Make sure your name is listed on your utility accounts, an item often
overlooked by many. When you go to get credit, they often look to see if
you have a phone number in your name. If you don't, even if you are
listed in the phone book at that number, it can be problematic.
"Before signing the divorce papers, consider one addendum: change of
name authorization. Crazy as it seems, many states require your
ex-spouse's signature before issuing you a driver's license or other ID
in a previous or maiden name. Men who added hyphens during marriage
could encounter identity trouble, as well."
Divorce.net offers very fitting final thoughts.
"Your spouse may be in contempt of court for disobeying a court order
that requires him [or her] to pay certain bills. However, if you are
jointly liable to a creditor as in the case of a mortgage or co-signed
credit applications, your spouse’s contempt of court is NO EXCUSE for
your non-payment. It simply isn’t a legally sufficient defense to say,
“It’s no longer my responsibility because the court ordered my spouse to
pay.”
And from yours truly I add this. Until you are financially divorced with
your own credit established, you remain tied to your former spouse.
Divorce is not the tidy little package some people would like to think
it is. It is not simply a matter of walking out one day. Over and above
issues of child support and alimony, there are other financial
ramifications beyond the emotional ones. The greater the communication
at these times on both parts, the less of an impact there will be to
both parties and the sooner the final separation will occur.
Communication is critical in a marriage. It is just as critical in a
divorce.
Article Directory:
www.articledashboard.com
Mike has been an
Internet Guide/Writer in the field of Credit/Debt Management for over 10
years. His site was awarded Best Of Net by Forbes Publication from 2000
to 2005 with site visitation doubling to over 500,000 average views per
month in the last year. He has also offered debt elimination seminars to
businesses and community colleges for the last 9 years. He has been
interviewed on the radio many times and referenced in numerous
publications.
learncreditmanagement.com/
|
|
 
Additional Articles
|
