Protect Your Credit While Going Through a Divorce

By Staff Writer

Many couples going through, or contemplating, a divorce, bring to the table financial problems that can result in negative credit ratings and potential litigation from bill collectors. So that you can best protect yourself, it is important that you be aware of potential credit pit-falls. Typically, in negotiating divorce settlements, parties divide their various liabilities and direct that only one party will be responsible for paying a specific joint debt. The danger of this scenario is that, if your former spouse fails to make payments on this account, the creditors can come after you. Despite the wording of the divorce judgement and agreement, the creditor can still come after the party who is not "named" as the party responsible for paying this joint debt because the creditors are not parties to the divorce and are not bound by the terms of the parties’ agreement.

To protect yourself from the possibility that your spouse will fail to pay the joint debt pursuant to the terms of your divorce agreement, before the settlement is entered into, you should contact the creditors and ask them how to transfer your joint debt to the name of the person who will be responsible. The divorce agreement should specify that the responsible party is bound to either transfer the debt to his or her own name or to take out an individual consolidation loans to pay off the joint accounts. Similarly, if your former spouse will be assuming responsibility for a joint mortgage, he or she should be required to refinance the loan so as to remove your name as a joint-obligor. If your ex cannot refinance, the house should be sold and proceeds divided.

Other credit problems can arise during the pendency of a divorce action. If your spouse pays joint bills late, or misses payments entirely, your credit can be effected. Even if you ultimately will have no responsibility for the debt, you should continue to keep paying at least the minimum amount due on your joint bills during divorce negotiations. If you don't, the missed payments on joint accounts will be posted to both your credit report and your spouse's report. Negative information can remain as long as seven years, even if you later pay the amount in full.

Unfortunately, many parties run up large amounts of joint debt prior to or during a matrimonial action. To protect yourself from liability for debts which are incurred by your spouse, you should contact the creditors and attempt to close the accounts to future charges. You should then inform all creditors, in writing, that you are not responsible for these debts after a certain date. Be sure to keep a copy for your records, and consider sending the original letter via certified mail. While this may not prevent creditors from trying to collect, it does show that you at least attempted to act responsibly. Remember, even if your name is taken off an account, and even if the account is closed to future charges, you might still have legal responsibility to pay existing balances.