When contemplating divorce, one of the first issues to be handled, after custody, is the distribution of marital assets. What some people fail to do adequately, however, is address the issue of joint debt that has accumulated during their years together. Failure to take care of debt and credit issues can lead to credit rating nightmares for years to come.
People may fail to realize that a divorce decree does not change the commitments made to creditors. When you incur debt of any type – mortgages, loans, credit cards – you are entering into a legal contract to repay that debt in compliance with terms of the loan.(1) There are several ways to handle marital debt and save your credit rating.
It is possible to come to an agreement as to which partner is responsible for which debt after divorce and have those terms included as part of your divorce agreement. For instance, the spouse who keeps the house may assume mortgage payments, while the spouse who takes the family car assumes the car loan. Just know, however, that if those loans remain in joint names and the responsible party fails to make the payments, that failure will appear on both parties’ credit reports. (2) Online access to your accounts can help you see potential problems before they get out of hand.
Credit cards are another issue that need attention. When emotions become heightened during a divorce, a vengeful spouse may run up bills in order to punish his or her ex. If you have joint credit cards, as many married couples do, you have a couple of options. Pay off the card, close the account, and open a new account in your name only. If that is not possible, alert the credit company that you are divorcing and request the account be closed or at least frozen. Let them know you will not be responsible for any charges your ex may run up following the divorce. (3)
Sometimes one spouse will hold a credit card, naming the other spouse as an authorized user. If you are the official cardholder, ask that your ex-spouse be removed as an authorized user on the account. If you are the authorized user, simply request that your name be removed from the account. As long as more than one name appears on the account, payment delinquencies can be reported to each user’s credit rating. (4)
Addressing credit issues as part of your divorce agreement can help you avoid ruining your credit rating. If you require assistance with any aspect of a divorce or family law situation, contact the experienced, Hunterdon County family law attorneys at The Rotolo Law Firm.