Credit and Divorce

Mary and Bill recently divorced. Their divorce decree stated that Bill would pay the balances on their three joint credit card accounts. Months later, after Bill neglected to pay off these accounts, all three creditors contacted Mary for payment. She referred them to the divorce decree, insisting that she was not responsible for the accounts. The creditors correctly stated that they were not parties to the decree and that Mary was still legally responsible for paying off the couple's joint accounts. Mary later found out that the late payments appeared on her credit report.

If you've recently been through a divorce-or are contemplating one-you may want to look closely at issues involving credit. Understanding the different kinds of credit accounts opened during a marriage may help illuminate the potential benefits-and pitfalls-of each.

There are two types of credit accounts: individual and joint. You can permit authorized persons to use the account with either. When you apply for credit-whether a charge card or a mortgage loan-you'll be asked to select one type.

Individual or Joint Account

Individual Account: Your income, assets, and credit history are considered by the creditor. Whether you are married or single, you alone are responsible for paying off the debt. The account will appear on your credit report, and may appear on the credit report of any "authorized" user. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other.

Advantages/Disadvantages: If you're not employed outside the home, work part-time, or have a low-paying job, it may be difficult to demonstrate a strong financial picture without your spouse's income. But if you open an account in your name and are responsible, no one can negatively affect your credit record.

Joint Account: Your income, financial assets, and credit history-and your spouse's-are considerations for a joint account. No matter who handles the household bills, you and your spouse are responsible for seeing that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977).

Advantages/Disadvantages: An application combining the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card. But because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don't pay them can hurt their ex-partner's credit histories on jointly-held accounts.

Account "Users" If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse's name as well as in yours (if the account was opened after June 1, 1977). A creditor also may report the credit history in the name of any other authorized user.

Advantages/Disadvantages: User accounts often are opened for convenience. They benefit people who might not qualify for credit on their own, such as students or homemakers. While these people may use the account, you-not they-are contractually liable for paying the debt.

If You Divorce If you're considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it's important to make regular payments so your credit record won't suffer. As long as there's an outstanding balance on a joint account, you and your spouse are responsible for it.

If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Or ask the creditor to convert these accounts to individual accounts.

By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.

For More Information If you need additional help during this time of financial stress, please call Cindy Morus at 541-387-2995. She's been through it, too.

Cindy S. Morus (www.phelps-creek.com) is a Certified Financial Recovery Counselor specializing in showing women and their families how to achieve financial well-being and peace of mind. She is also a Certified Credit Report Reviewer and Get Clients NOW!? licensee. Contact her at 541-387-2995 or cmorus@phelps-creek.com She is also the publisher and editor of "Financial Fitness", an internet gazette dedicated to helping people improve their financial fitness no matter what decisions were made in the past.

Attention Ezine editors/Site owners: Feel free to reprint this article in its entirety in your ezine or website as long as you leave all links in place, do not alter the content and include our resource box as listed above. If you do use the material please send us a note (cmorus@phelps-creek.com) so we can take a look. Thanks.

---

5 Ways To Ensure You Will Have a Happy Life After Divorce

Life after divorce is something that most people who are... Read More

Love and Marriage Fairy Tale

When we were children we believed in fairy tales and... Read More

Spare Your Kids To 7 Most Distressful Divorce Parenting Situations

What 7 most distressful situations to kids that divorced parents... Read More

How Women Should Protect Themselves Financially Regarding Divorce

Women who believe a divorce is a possibility or who... Read More

Does Living In A Loveless Marriage Necessarily Mean That You Should Get A Divorce?

Being in a loveless marriage is a frustrating predicament, but... Read More

Healing Dysfunctional Families

In a recent article entitled "Some Evidence On How We... Read More

Two Hearts Are Now One

It is fitting that I should write this story on... Read More

Marriage Seperation - A Practical Guide

Finance in marriage seperation is a very big issue particularly... Read More

10 Ways to Keep Divorce Lawyers From Ruining Your Life

Everyone has heard the story (from friends, co-workers, and family... Read More

How Can Collaborative Law Be Beneficial In Your Texas Divorce?

Collaborative law is based on the realization that the commitment... Read More

9 Steps to Regaining Self-Esteem After Divorce

Divorce is difficult at the 'best' of times. Even when... Read More

The Legal Side of Divorce

While divorce can be an emotionally draining experience, even in... Read More

Reasons For Divorce; What Constitutes Viable Reasons For Thinking About Or Wanting A Divorce?

According to the Center for Disease Control's National Vital Statistics... Read More

Five Christmas Survival Tips For The Divorced & Single Parent

For the over 50% of marriages that end in divorce,... Read More

Stop Divorce: Should You Try To Stop Your Divorce If Youre Just Thinking About Getting A Divorce?

Thinking about getting a divorce doesn't necessarily mean that you... Read More

Houston Divorce Lawyer - West Houston Attorney Answers Common Questions About Mediation

If you are reading this, then you are probably either... Read More

How To Protect Your Life Insurance Policy While Going Through A Divorce

Life insurance, more than most things you buy, relates to... Read More

Get Over A Divorce and Prepare for Divorce Recovery!

It can be difficult to get over a divorce and... Read More

Divorce: Coping With The Family Law Process

The EmotionsDivorce is a scary, lonely and misunderstood process for... Read More

Joint Bank Accounts and Divorce

Here are some useful tips on joint bank accounts and... Read More

Dating Tips for Divorced and Widowed Moms

Dating is tough for just about everybody, but it's even... Read More

Commitment

Being marriage means being fully committed to your husband as... Read More

Steps Toward Divorce

When you're faced with the possibility of divorce it's important... Read More

Surviving Divorce: What To Think About To Ensure Surviving Divorce

Surviving divorce can be a valid fear if you're contemplating... Read More

The Impact of Divorce on Families

As a licensed mental health professional, I work with many... Read More

Divorce--Getting Legal Help Without Paying Exorbitant Attorneys Fees

Ignorance is the most common trap in the business of... Read More

Anatomy of a Divorce: How it Really Works

The legal divorce vs. your real divorce The legal... Read More

The Heart Moves On: Using Ceremony to Mark the End of a Relationship

Divorce or the end of a long-term relationship is a... Read More

Is Your Marriage Problem Severe Enough To Warrant Getting A Divorce?

Having a marriage problem can be agonizing especially if you're... Read More

Tax & Financial Impacts of Divorce: 10 Mistakes to Avoid

Divorce is something no one hopes will happen to them... Read More

Hidden Divorce Costs

Divorce has become part of life in the 21st century.... Read More

Divorce Advice: Getting Divorce Advice From the Right Source

Getting the right type of divorce advice depends on what... Read More

3 Major Divorce Parenting Mistakes And Learn How To Avoid Them

What 3 major divorce parenting mistakes that surely lead to... Read More