Divorce is hard, and it can have a lasting effect on your life. Untying yourself from your ex is difficult, and bad credit can occur from a divorce due to joint loans and credit. While each spouse will maintain his or her own credit history, this doesn’t mean that joint credit will not put a strain on each spouse’s credit.
1. Obtain a Credit Report
The first step should be to obtain a recent credit report from one of the best credit repair companies. You may have forgotten about joint accounts or you may not have realized the extent of your current debt. A credit report will allow you to have a full understanding of your joint debt that can result in hardship following a divorce.
The government allows you to get a free copy of your credit report every 12 months.
2. Close Joint Credit Accounts
If you had a joint credit card with your spouse, you will remain responsible for any spending that occurs while the account remains open. Close your account by calling the credit company and follow up by sending a certified letter to the credit lender to close the account.
You will remain responsible for the debt that remains on the account, but this limits the damage that can be done.
3. Close or Modify Joint Loan Accounts
Joint loan accounts also need to be closed or modified. If you’re allowed to keep the house, refinancing the loan so that your name is the only name on the account is a wise decision. This can be done with all loan accounts, or in the event that the lender will not allow the change, the account can be closed.
Discussing these issues during your divorce is recommended.
4. Remove Joint Bank and Investment Accounts
You should remove the other person from any joint bank accounts and investment accounts. You’re not allowed to withdraw all of the money and walk away. Instead, you want the court to decide fair distribution of the accounts and to proceed from there so that you don’t open yourself up to legal problems in the future.
Putting a freeze on all accounts may be recommended by your attorney.
Changing accounts, so both signatures are required for a withdrawal is also a possibility. This way, neither of you can withdraw money without the other person’s consent. If bank accounts are controlled by both parties, it can easily lead to one spouse removing all of the money in the account and the other not being able to pay loans, bills and other accounts accordingly.
5. Pursue Legal Agreements
Legal agreements should be pursued where possible. A prenuptial agreement will allow the both of you to determine, prior to marriage, how income and debt within in a marriage should be handled in the event that a divorce takes place.
Setting clear debt boundaries is also a possibility in a community state.
When getting married, it’s a smart choice to limit the debt the two of you maintain together and to ensure you’re responsible with all joint accounts held. Late mortgage or automobile payments on a joint account can damage both your and your ex’s credit.
The Micklin Law Group, LLC is a New Jersey law firm specializing in family law and estates. Attorney Brad Micklin was recently named to The National Advocates list of Top 100 attorneys from each state. Brad has a special expertise in working with high asset divorce. You can read more on this topic by visiting our divorce blog. To set up a consultation, call 973-562-0100.