Divorce & Credit
Going through a divorce can be a challenging time for anyone. During this time, you will not only be figuring out how to live your lives separately, but also how to handle your finances separately. If you are going through a divorce or are contemplating a divorce, amongst all the other considerations, it is important to look closely at issues involving your credit and discuss them with your attorney.
While a judge may issue a divorce decree on how money and property will be divided, a divorce decree does not separate the actual financial accounts that were shared with a former spouse. While divorce does not directly impact your credit (marital status doesn’t play a role in determining your credit scores), it can impact it indirectly. Below are some credit-related things to consider when getting divorced.
Your Accounts: Joint & IndividualWhen getting a divorce, you not only divide your assets, but you divide your debt. The rules for how debt is distributed during divorce vary from state to state. In most states, for joint accounts, marital debt includes any debt incurred during the marriage regardless of whose name actually appears on the title. In other words, you and your ex will likely be jointly responsible for whatever credit card debt or personal loans you took out together during the marriage.
If you have separate accounts and cards, and only one spouse is responsible for the purchases on that card, then the spouse who made the purchases will most likely be responsible for that particular debt. If, during the marriage, one spouse took out a loan for his or her benefit in his or her name only, then that spouse will likely be solely responsible for that debt unless something else is agreed upon during the divorce proceedings.
Marital DebtMarital debt is debt that you both have accumulated during the marriage. One of the most important considerations regarding marital debt is determining when you are no longer considered to be accumulating marital debt. The extent of your liability for credit card debt depends on whether you live in a common law or community property state, whether the debt is for a joint or individual debt, and to whom the debt is assigned in the divorce.
In common law states, which the majority of states are, you are generally liable for all debts in your name. This means that if you took out a credit card in your name or if you cosigned on it, the creditor can come after you to collect the debt. Accordingly, after the divorce, you can be held liable for all individual or joint credit cards as long as your name is on them.
In community property states, most debts incurred by either spouse during the marriage are considered community debts and both spouses are held equally liable for community debts even if only one spouse incurred the debt. If you live in a community property state, you may be on the hook for a credit card even if it is in your ex-spouse’s name only.
Even if you have an agreement regarding how debt will be allocated during divorce, credit card companies are not bound by the terms of your divorce decree or a family court order. Therefore, regardless of whether a debt was assigned to your spouse in the divorce, you will still be liable for it if your name was on the account, you were a cosigner, and/or it was a community debt.
Personal CreditOnce you separate your credit and debts from your ex’s, it is time to build your personal credit. You can start building your credit by having a credit card and your bills put solely in your name, and paying your bills in full and on time each month. Then track your credit score to ensure that it improves over time. You are allowed one free credit report per year from the three primary credit reporting agencies. There are also other websites that allow you to monitor your credit report and your credit score for free.
Your credit is vital to your financial health, so if you are going through or contemplating a divorce, you need to understand and account for your credit during that process. An experienced divorce lawyer can guide your through not only your divorce, but maintaining your credit and financial wellbeing during the process. Find an experienced divorce lawyer by quickly posting a short summary of your legal needs on Legal Services Link, and let the perfect lawyer come to you!
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