Don’t let divorce ruin your credit rating
When a divorcing couple agrees on a settlement, or when a judge makes a divorce ruling, the joint debts of the party are often split as fairly and evenly as possible, depending on the other elements of the dissolution and each party’s individual and joint financial situation. Therefore, one spouse may be required to pay the Visa bill, while the other spouse pays the MasterCard. One spouse makes the car payment, while the other pays the cable bill.
Unfortunately, although the court requires the spouses to comply with the family court order, credit card companies and other creditors don’t really care who has been assigned to pay the bill. They just want to be paid. So if one spouse doesn’t pay the bills on time per the divorce order, creditors often go after the other spouse, even if it isn’t their duty to make the payment. This can result in a serious downgrade of the spouse’s credit rating, as well as severe financial harm.
So what can you do to protect your credit rating following a divorce? Experts say that knowledge and planning are very important. Create a budget with your spouse, adding all bills and payments, and come up with a plan that is realistic and achievable for both of you. Dig back into your financial history to ensure that you haven’t forgotten about any old accounts that you no longer use, but that may still be open.
If possible, untangle your joint checking and credit card accounts, which will remove one spouse from having any liability on the account. In addition, remove your spouse as an authorized user on your accounts, to protect yourself from an unplanned spending spree.
If you are unable to split the joint accounts, make sure that you keep a close eye on them so you can detect any strange or improper activity. If you do, confront your spouse immediately. If he or she is not paying the bills, the only way you may be able to compel payment is to return to family court and file an order for contempt.
Source: Fox Business, “How to Protect Your Credit During Divorce,” August 10, 2011