Divorce Can Mean Disaster for Your Credit
One of the biggest challenges facing couples about to divorce is separating their joint financial obligations. While this project is foremost in the minds of most couples, few consider the possible impact of that separation on their respective credit histories and credit scores. More importantly, many people believe a judge's order for one person to pay a specific debt means that the other person is relieved of the obligations. This thinking can spell disaster unless your divorce plan also includes a plan for separating your credit history.
You Are Responsible For Joint Debts, After Divorce.
Husbands and wives each have their own distinct credit when they enter a marriage. They continue to maintain these separate histories even after marriage, and through a divorce. While each spouse has their own history, both parties in a marriage are legally and financially bound to any joint debts that they enter into during the marriage. These joint debts typically include home and car loans, as well as household credit cards. These joint debts arise because each spouse has expressly agreed to pay the debt. While many couples have credit accounts where one spouse is an authorized user, authorized users are not responsible for paying of the account. Rather, the obligation to pay only arises when the card holder agrees to pay.
As to any joint accounts, both spouses are responsible for those debts. And that responsibility continues on even after the marriage is dissolved through the divorce process. This means that the credit history of any joint account will also continue after the divorce, even if a judge order one of the spouses to pay the debt. So if you have not discharged all of your joint debt by the time your divorce is final, your credit history will remain tied up with your former spouse, even after your divorce.
Collection of Individual Debt, After Divorce
Even if you have no responsibility for a debt under your final divorce settlement agreement, creditors may begin collection activity or adverse credit reporting against you if you opened the account with your spouse. While attempting to enforce a debt against a party who is not responsible is illegal, many debt collectors will attempt to do so in hopes that the parties cannot remember whether they agreed to pay the date. Additionally, If your former spouse declares bankruptcy, you may be left as the only responsible party to the joint marital debts and be required to pay off the entire amount.
To prevent these things from happening, family attorneys and people anticipating divorse should engage in a proactive effort to address these potential issues before and throughout the divorce process. Addressing these issues early in the divorce process can often result in better outcomes for both parties.
Six Ways To Plan Ahead And Prevent Credit Damage To Your Credit
While it is impossible to predict what your future ex-spouse may do after the divorce is finalized, there are things that you can do with the help of your family law attorney to help prevent these issues from happening.
- Set up a file for debt and credit reporting matters. These files should include copies of credit reports for both you and your spouse. These documents will help establish a “baseline” of what your credit looks like before the divorce and can help with proving damage if your spouse takes action to harm it. These reports will also show which accounts are held jointly and which ones are the responsibility of individual spouse.
- Identify all outstanding credit obligations of each spouse as well as the joint marital accounts. This will allow you to determine which account hold the possibility of harming your credit after the divorce. Also, knowing which accounts belong to you will insulate you from from being cheated into paying debts that you do not actually owe.
- When you are certain that your are going to divorce, contact creditors on all marital accounts and make sure both you and your spouse agree to stop new charges on these accounts. Make this request in writing and don't forget to request a written confirmation of closure from each creditor.
- Once the divorce is under way, your family law attorney should arrange with the other side to close and discharge any joint account. Joint debts can often be refinanced and transferred to only one spouse's name, consistent with the responsibilities assigned in the divorce judgment. There may be more than one way to accomplish this and your family law attorney should be able to help you achieve a desirable outcome if you take this approach. By closing any joint accounts -- including mortgages and car loans -- you can be sure that the financial actions of your former spouse after the divorce will not follow you.
- In the event that you are not able to pay off all the joint debt from your marriage, have your family law attorney negotiate terms that include remedies for harms by your former spouse. Your attorney should be able to help you include protections in your divorce settlement so your former spouse will have to compensate you for any harm or credit damage in the event that your former spouse fails to pay for their share of debts or incurs new debt in your name.
- Continue to monitor all your accounts through your credit report. Your former spouse likely had access to that account information and could make purchases on the account. Once a debt goes delinquent, you lose out on many options in terms of fixing these adverse credit items. The best way to avoid this is to be proactive. Ask that your creditors issue new account numbers for any open accounts and monitor your credit. Doing so allows you to maintain your options and prevent serious credit damage from occurring.
Following these steps will help reduce the chances of having credit harm from your divorce. If you're experiencing debt-related problems stemming from your divorce, we may be able to help.
Need Help with a Dispute
If you find errors on your credit report and would like help get your report restored, call us for a free consultation or contact us through this web site. We provide a range for attorney-assisted and free self-help tools to help clear your report of errors. There is no charge for the consultation, and we handle all legal work on a contingency basis, so your fees are paid by the people who hurt your credit, and we only charge if we recover for you.
Lyngklip & Associates
Lyngklip & Associates Consumer Law Center, PLC, is proud to be Michigan's leading credit reporting firm. We dedicate ourselves to representing Michigan consumers, and we're here to help our clients every step of the way. We plan our case strategies to minimize our clients' expenses and maximize their recovery. To do that, we handle credit reporting cases on a contingency fee basis. That means that you don't pay anything upfront for fees. You only pay our law firm a fee if we recover damages for you. Call us today at (248) 208-8864. Or, you can fill in our Contact form
What Additional Resources Are Available?
- Want to see a list of the credit bureaus who keep data on you? Check out our Credit Bureau List.
- If you need help deciding which reports you need, you can read our article on Credit Reports to Order.
- Need help getting your credit report, see our article on How to Get Your Credit Report.
You may have a case under the Fair Credit Reporting Act if you notice the following things on your background report:
- Fraudulent identity theft accounts on your credit credit report.
- Someone else's Information on your credit report.
- Paid accounts still showing a balance due.
- Reporting your accounts in good standing as charged off or in collections.
- Discharged debts still reporting as owed.
- Paid tax lies showing as still owed.
- Derogatory accounts more than 7 years old still on your report.
- Previously deleted accounts that have been reinserted on your report.
- Duplicate reporting of the same account.
If you would like help with one of these problems, call (888) 400-CREDIT | (888) 400-2733 or contact us through this site.
How Much Are Your Fees?
We only charge a fee if we are able to recover for you, and The Fair Credit Reporting Act requires the other side to pay your attorney's fees if you win. You pay nothing up front and we take our fee from the other side.
Follow Up and Monitoring
After your case is done, we will help you to regularly check and monitor your background checks with free annual reviews of your background checks and credit reports to insure that you stay free of false conviction information.
Work with a Credit Report Attorney
If you have been the subject of an inaccurate credit report, you may have be able to seek a correction and compensation for any harm. Our firm can help. For more than 25 years, the attorneys of Lyngklip & Associates have represented victims of bogus credit reports credit reports and been a resource for Michigan consumers who need the help of an experienced lawyer.
To learn more or to schedule a free initial consultation with a credit report lawyer, contact our law firm today or call (888) 400-CREDIT | (888) 400-2733 or contact us through this site. In Michigan, you can reach our office at (248) 208-8864.