Credit & Divorce

This section looks at the issues that you will face if you decide to divorce. Use this information to understand the rules regarding your rights and your partners rights if you make this life changing decision.

Lets start with the basics: There are two types of credit accounts, individual accounts and joint accounts. You are allowed to authorize additional users on both kinds of accounts.

With regard to Individual Accounts, your income, assets as well as your overall credit history are considered by the lender. You and only you are responsible for paying off this type of account. Record of Individual Accounts in your name will definitely appear on your credit report and record of the account could also appear on the authorized users credit report.

It is important for you to understand that if you live in a Community Property State that both you and your spouse could be held responsible for debts that are made by both of you during the time that you were married regardless of what kind of account it is. In other words the debts of your spouse could be reported on your credit report and vice versa.

Keep in mind that if you are self employed, are a part time employee or if you have a low paying job that you may find it to be very difficult to get credit without your spouses reported income. If you have opened an account in your name and you have handled the account responsibly no one can take the account away from you when you divorce.

I feel that it is important to note that user accounts that have been opened for the authorized users convenience because he or she could not get credit on their own during the marriage are often handed back to the person whose name appears first on the account by a court. In other words the first applicant could be left “holding the bag” after a divorce.

If you are separating or divorcing you must continue to pay all of your accounts faithfully until the court decides which accounts are the responsibilities of either party. It is unwise to take a righteous attitude and not pay accounts if you feel the debt incurred on the account belongs solely to your partner if you suspect that they will not keep up with the payments. This may seem unfair but it is none the less part of the price of divorce.

If you divorce you may wish to close out all joint accounts or ask the creditor to change those accounts into individual accounts. By law a creditor can not close a joint account because of divorce but can close a joint account if either spouse requests it. Creditors are not under obligation to change joint accounts into individual accounts just because you ask them to do so. A creditor could require you to reapply for a brand new account in just your name. Again, this is part of the price of divorce and all options and considerations should be looked at closely.

Regarding a mortgage or home equity loan, creditors will normally require extra financing to remove a spouse from the loan.