Survive a Divorce and Not Ruin Your Credit

A divorce decree does not change the fact that you are a co-borrower on a loan. What typically happens is a couple divides their debt with no regard for who is legally responsible for the debt.

Each person is still responsible regardless of what the judge says.

Both co-borrowers will suffer if one borrower defaults. So it's best to assume responsibility for all debt for which you were a co-borrower. This will ensure your credit is not negatively affected.

Here are some credit tips to help you through a divorce.

Steps

 * 1) Close joint accounts before you separate or divorce to prevent your former spouse from running up charges and leaving you responsible for the balance. Closing accounts is the lesser of the two evils in this situation. Closing accounts before you separate will make it easier since your spouse is more likely to cooperate with you. Some financial institutions will require the primary account holder to close the account. If that's not you, then you're going to need the help of your soon to be ex-spouse.
 * 2)  Establish separate accounts, such as credit cards, gas cards and retail cards. This ensures that both parties are individually responsible for their own accounts, which is valuable in a divorce. The crown jewel out of this is you won't have to worry about re-establishing credit on your own...because you will already have it.
 * 3)  Arrange new individual lines of credit with the same lenders to replace each joint account and transfer agreed upon balances to those new accounts. You want to avoid paying any new charges your ex-spouse makes.
 * 4)  Some creditors will require you to pay off the account before they put it in an individual name. If you cannot pay off the balance, at least try to close the account to prevent any new charges.
 * 5)  It may be wise to have an attorney involved if creditors refuse to cooperate with you. The first thing your attorney will need is a copy of the agreement you signed with the creditor. There are several legal service plans that are cost-effective for this sort of thing.
 * 6)  Try settling the account with the creditor directly by paying a smaller amount than what is owed. The threat of bankruptcy could help your plea. Just be sure you get promises in writing from the creditor. Also make sure they will not report or try to collect on the deficiency balance.
 * 7)  Pay the jointly held bills yourself--then go after your spouse for the money owed.

Tips

 * When you open joint accounts you and your partner sign a legally binding agreement holding both of you responsible for the account. The divorce decree is another binding agreement between two people who consent to divorce. It does not change previous agreements between you and other creditors.
 * It doesn't matter to the creditor who actually made the charges (if it's a credit card). It doesn't matter who agreed to pay in the divorce decree. And it certainly doesn't matter to the creditor that you're getting a divorce. The creditor will try to collect from both borrowers.
 * A word to the wise, don't sign a divorce petition until everything with your jointly held credit is worked out. Promises to fulfill at a later time or by a certain date can be overlooked and expensive to enforce.
 * What I mean by "worked out" is that all credit held jointly is closed, refinanced into individual names, or paid off to eliminate the debt.
 * "Worked out" does not mean that your ex-spouse has signed a promissory note or some other legal document promising to pay off debt.
 * An irresponsible or vengeful ex-spouse can wreak havoc on your credit rating for years after a divorce. It's legal harassment in its truest form.

Warnings

 * Do not sign a divorce decree until all credit matters are resolved. Signing the divorce decree should be your trump card and a very good reason to make things happen your way.

Related

 * How to Survive a Divorce
 * How to Choose the Right Divorce Lawyer
 * How to Handle Divorce Anger
 * How to Deal With Children in a Divorce Situation
 * How to Be Happy After Divorce
 * How to Hire a Divorce Lawyer