Credit Issues and Divorce
Even when your marriage is in fine shape, it pays to think
about the possibility of a divorce in your future. Today,
more marriages end by divorce than by death of a spouse,
and all divorces have financial as well as legal and
emotional consequences. While your lawyer can protect your
legal rights, the financial aspects of the divorce need
just as careful attention, because they will directly
affect your future standard of living.
In divorce, who suffers more financially, women or
men? Divorce has significant impact on the financial
situations of both spouses as they divide assets and
establish separate households.
Women often experience greater hardship because they have
custody of the children, their incomes are usually less
than their ex-spouse's, and they may have accepted a
minimal financial settlement during the divorce. Smart
Money reported in September 1995 that 26% of women
experienced a decline in their standard of living in the
first year after divorce.
Effective communication is difficult during a divorce, yet
the more you can separate the financial aspects, the
sooner you will be able to make a clean financial break.
Here is a checklist of things to talk about during the
Discuss all the credit accounts held jointly, such as
mortgage, home equity loans and credit cards. You should
notify your creditors of your decision to divorce and
reopen the accounts in only one spouse's name. This
will also help each spouse establish individual credit
The Equal Credit Opportunity Act states that a creditor
cannot close a joint account because of a change in your
marital status. However, a creditor can close the account
at the request of either spouse. The creditor may require
each spouse to reapply for credit on an individual basis.
With either a mortgage or a home equity loan, a creditor
usually will require refinancing to one spouse.
A joint account makes both spouses legally responsible for
all credit debt. Even if the divorce decree states that
one of the spouses will assume the responsibility of a
debt, if both names are on the account, the spouse not
responsible for the debt can bec,pome legally responsible
for the debt if the other spouse does not pay.
A divorce decree is a legal document between the couple,
but creditors do not really care who is required to be
responsible. Creditors can and will try to collect from
either spouse. This is particularly important for credit
cards. If the account remains open during or after the
divorce, then your ex-spouse can charge large amounts and
leave you with the bill to pay.
During the divorce process, make sure that all credit
accounts are being paid or both credit records will
indicate nonpayment or late payment. Both spouses are
liable for the debt on any outstanding balance on a joint