It's important to remember
that credit grantors have different policies when it comes to divorced
couples and joint accounts. Be sure to contact each of your creditors
individually to discuss whether you or your ex-spouse will have
ongoing liability for the accounts.
Also, ask them how to transfer your joint debt to the name of
the person who will be responsible (usually, this means signing
an agreement with the credit grantor to release one of you from
liability). The creditors may not agree right away. In fact, they
have every right to defer a decision until you prove you can handle
the payments alone. Nevertheless, this is a smart step to take
to protect yourself from new liability and start reestablishing
credit as an individual.
If your spouse runs up large amounts of debt, close whatever accounts
you have to future charges as soon as possible. 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. While this may seem unfair since it was
your ex who did the spending, it's perfectly legal. That's why
it's important to close your joint accounts as soon as you can.
If you have a good credit history, open new accounts in your individual
name. If your joint accounts have balances, obtain individual consolidation
loans. Use the individual loans to pay off your joint accounts,
then close the joint accounts. You'll each be solely responsible
for paying off your individual loans - and you'll be safe from
having your ex negatively affecting your credit. View other articles
on divorce.
Credit and marriage
Managing your credit can be tricky, even when you're the only person
involved in your financial decisions. Add a new spouse to the
mix, and you have to be extra careful to ensure your credit remains
in good standing.
For many engaged couples, talking about finances takes a back
seat to the excitement of wedding planning. But, before saying "I
do," you need to be aware of the credit issues that could
arise with a new marriage.
First of all, both you and your spouse should put all your financial
records - savings, salaries, investments, real estate, and especially
credit - on the table. If one of you has a less than glowing credit
history, it will affect the other as soon as you start applying
for credit together and opening joint accounts. In addition, your
new joint accounts will appear on both spouses' credit reports
in the future, so be sure to pay careful attention to your bills
and pay them on time.
Once you've aired your credit laundry, you'll need to decide whether
or not to merge all of your financial accounts. Many couples do
this because consolidated accounts often make for easier record
keeping. Just remember, both of you are responsible for all debt
incurred in any joint credit accounts. So, regardless of who's
incurring debt, a missed payment on a joint account will negatively
affect both of your records. Consider also if you miss a payment
on an individual account, that payment may very well impact your
ability to open joint accounts because both credit histories will
be considered.
The best way to keep your record clean starts with a solid understanding
of the terms of your joint accounts. That means paying attention
to interest rates, credit limits, annual or late payment fees and
cash advance limits. If you decide to consolidate your accounts,
you might want to keep at least one credit account in your own
name as a safeguard in the event of an emergency. Keeping an individual
account can also be a good thing in the event of divorce to reestablish
an individual credit history.
Women who take their husband's surname after getting married need
to notify the Social Security Administration and their current
creditors of this change. You do not need to notify the credit
bureaus of a name change. They will automatically update the name
on a credit report when creditors report it.
If you plan to have children, you can best prepare yourself now
by building a cash reserve to meet the eventual expenses of having
a baby. This will help you avoid over using credit in meeting expenses
such as cots, prams, nappies, clothes, playpens and toys.
Building a savings account is also essential for buying a home
and being prepared to face such emergencies as severe illness,
disability or job layoff.
The key to successful credit management as a couple is understanding
that your individual credit behaviour affects both you and your
partner. To ensure that you are able to quickly get credit at the
best possible terms, be sure you both understand all the implications
that accompany a joint account. In addition, consider how the payments
stemming from a major credit purchase will affect your overall
budget.
Credit during divorce
The
first rule of thumb when dealing with divorce is self-protection.
This means protecting your credit as well.
During divorce proceedings, close any joint accounts to avoid
further charges. Do your best to pay off or reduce the balances
on joint accounts, and completely close the accounts when balances
are repaid. These steps can help prevent your ex-spouse from running
up debt during and after the divorce.
Next, close all joint accounts and ask your lawyer to draft an
agreement between you and your spouse about splitting the debt.
Although this is usually part of the final divorce agreement, in
some cases divorce proceedings drag on for months, even years,
so try to settle credit and debt disputes as soon as possible.
Divorce and debt
Dealing with joint credit accounts can add to the
headaches and heartbreak of divorce. But there are a number of steps
you can
take right now to avoid many hassles down the road. Keep in mind
that a divorce decree alone has no impact whatsoever on your joint
accounts - including credit cards, car loans, home mortgages and
lines of credit. Why? Joint accounts mean joint liability. When
you obtained a joint credit account, you and your spouse agreed
you would both be responsible for paying the bills. In other words,
you're both responsible for the debt you incurred during the marriage.
And if one of you defaults, creditors will pursue the other.
Divorce and your home mortgage
When it comes to dividing up your
joint net worth in a divorce, the home is typically the most valuable
asset. While your divorce
papers will determine who may live in the home after a divorce
and who has ownership of it, they do not change the original contractual
responsibility to pay the mortgage.
This is something you must take care of in order to protect your
credit. You might consider refinancing the mortgage, so just one
of you bears responsibility for payment. If this doesn't work,
consider selling your home and dividing the proceeds. Always consult
your tax advisor before selling a home during a divorce so that
you are fully aware of the tax consequences.
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