How to protect your credit during a divorce
It is bad enough when a marriage fails, but hopefully, a divorce won't also ruin your credit rating. There are preventative measures you can take to try to keep the break-up from ruining your credit. Ideally, the protection of an individual's credit should be considered just as seriously as the acceptance of a marriage proposal. For example, in some states, prenuptial agreements are permitted to include clauses designed to protect the credit of both parties in a marriage. Personal credit standing is just too important to leave up to chance that the marriage will last and debts will be paid in a timely and complete manner, so it's important to be proactive. If the status of your credit never came to mind before you married, and you're now facing a divorce, it might still be possible to salvage your good credit.
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Instructions
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Gather all of the credit card statements, monthly bank account records, student loan documents, if any, mortgage and loan agreements, and other sources of debt you hold individually and jointly with your spouse. You need a clear picture of just how much debt is owed, who incurred the debt, why and when it was incurred and to whom these debts are owed.
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Contact the creditors for each of the joint accounts in which you are listed as "responsible for repayment" and ask that you be released from the responsibility of repayment, or request that the account be changed from a joint account to an individual account. However, be aware the creditor is under no obligation to remove your name off the debt. When you agreed to pay the debt if your spouse did not, you likely did so by signing a contract indicating your willingness to pay. Therefore, the creditor has little incentive to remove your name from the debt since that will make it that much harder for them to get their money.
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Don't make the mistake of assuming your soon-to-ex is making payments for debt or trust these payments will continue. It's unfortunate, but divorce sometimes brings out the worst in people. They may forego making payments on debts to hurt or annoy you, or because they just don't care how skipping payments impacts your or their credit rating.
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Continue to make payments on joint accounts until the status of these accounts has been officially changed and you are no longer financially responsible for them. Don't forget to keep up the payments on your individual debt accounts, as well. Divorce doesn't wipe out debts you created before your divorce or even those incurred before marriage.
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If need be, take out a loan and pay-off all of your outstanding debts. Doing so keeps debts from growing larger due to late payments, disagreements over who should pay for what and rising interest rates. This gives you a clean slate from debt as you begin living a new life after the disappointment of a divorce.
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Tips & Warnings
Consider filing for bankruptcy if the divorce has left you with no way to repay the debts you owe. However, when Congess overhauled the U.S. Bankruptcy Code in 2005, it made it much more difficult, expensive and time consuming to file a bankruptcy.
Don't rush out and open several new lines of credit just to celebrate the end of your marriage or signal your new-found freedom. Focus on paying down the debts you owe before incurring new, often unncessary debts.
If your credit was considered stronger when combined with your ex's income, consider opening a prepaid credit card account or a debit credit card. As you make regular, on-time payments, the strength of your credit will increase based on your actions alone.
Don't permit there to be secondary cardholders on your credit cards and don't become a secondary cardholder on another person's credit card. Keep your debts yours, and do not allow yourself to become liable for someone else's debts.
Creditor's don't have to automatically change an account already set-up from joint to an individual account. Sometimes, however, based upon the request of the person(s) listed on the account as responsible for repayment, these accounts can be closed. Be mindful, though, that you may then have to pay the balance due for the creditor to close a joint account and that you might have to re-apply to open an individual account.
Be sure to maintain well-documented records of any marital debts you paid even though you did not incur them. It's not unheard of for a vindictive spouse to go on a spending spree on a joint credit card in the hopes that their soon-to-be ex will be stuck with the bill.
