Divorce and credit card debt don't mixBest advice: Pay off joint debt before divorce is finalBy Todd Ossenfort
Dear Credit Guy,
I
am going through a divorce at this time. My wife is unemployed and has been for
13 years. She refuses to get a job. She is holding credit cards in her name
that we applied for in the past (MISTAKE). She is planning on using the cards,
and I want to protect myself. Do I write a letter to the creditors and the
credit bureaus and explain the situation? Do I try to close the accounts with
the explanation that she refuses to go get a job? How do I protect myself?
-- Jacob
Dear Jacob,
Ending
a marriage is never a pleasant task and separating finances from a marriage can
be even worse. I have heard many horror stories surrounding divorce. The most
important thing to keep in mind regarding finances in a divorce is that your creditors
are only interested in the signed agreement they have with you. The
fact that you are divorcing or divorced does not change that agreement. If you
have joint credit card accounts with your spouse, the only way to avoid
financial responsibility is to pay off the balance or have the balance transferred to an account in only your spouse's name and then close the
original account.
Divorce decrees often include credit card accounts, mortgages, student loans, car
payments, etc., that each spouse is responsible for paying. However, the only
way to enforce the division of debt in a divorce decree if a former spouse does
not pay is to take the former spouse to court. Court action is an expensive
process that would be better to avoid if at all possible.
The
best thing to do with any joint accounts is to close those accounts and move
the balances to separate accounts, as agreed in the divorce decree, before the
divorce becomes final. This may not be possible in your situation because your
spouse is unemployed. In some cases, if the divorce is not amicable, or one
spouse refuses to open another account and transfer the balance from a joint
account, I recommend you go ahead and close any joint credit card accounts to prevent
either spouse from adding to the balances. Most creditors will not remove your
name from a joint account if the account has a balance.
To
protect your credit score, request that the creditor send statements to you as
well as your spouse for closed joint accounts. If she does not pay, you may decide to make payments
on those accounts, even if your spouse is assigned those debts in the divorce. That's right, you may need to grit your teeth and pay her debt: As long as a joint account remains with
a balance, your credit score will be negatively affected if payments are not
made. You can always keep track of the payments made on an account assigned to
your spouse in the divorce and pursue collection in court at a later date when and if she does become employed.
You
are not financially responsible for any credit card accounts that are solely in your
spouse's name -- unless, of course, you are assigned to pay them as part of
the divorce settlement. Should that be the case, I would consult with your
attorney and be sure that all accounts in her name only assigned to you for
payment in the decree are closed before the divorce can be finalized as a
condition for you paying the balances owed on the accounts.
Take
care of your credit!
See related: Divorce and debt stories and advice, Dividing credit card debt in divorce, Protect your credit score during divorce, Dividing credit card debt in divorce, Tips for rebuilding your credit after divorce
Todd Ossenfort is the chief operating officer for Pioneer Credit Counseling in Rapid City, S.D. Pioneer Credit Counseling has been a member of the Association of Independent Consumer Credit Counseling Agencies since 1997.
The Credit Guy answers a question about a debt or credit issue from a CreditCards.com reader each week.
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Published: August 16, 2010
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