Preserving Your Credit During and After Divorce

Many couples fight about money. In today's economy, personal finances can easily become a sore spot in marriages. Layoffs that lead to extended periods of unemployment can strain relationships. Unless a marriage is otherwise solid, financial problems can cause significant damage and lead to divorce.

One problem many people encounter when filing for divorce, especially when money is an issue, is debt responsibility. During and after divorce, when money is tight and it is necessary to stretch the dollar even further, there may not be enough money between the parties to pay all the bills. This can cause further conflict between the parties and make divorce settlement negotiations difficult.

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Some couples may agree that bankruptcy is the best option to resolve debts in order to get a fresh start financially after divorce. By agreeing to file bankruptcy, the couple may alleviate the need to divide certain debts and can focus on establishing a new and separate credit profile after divorce. If a spouse will not agree to file bankruptcy and the other spouse files anyway, the legal responsibility for joint debts may fall on the spouse who did not file.

It is important to remember that while you may divorce your spouse, your credit may remain connected for some time to come. Divorce means nothing to creditors. If both parties have signed an agreement making them both legally obligated to pay a debt, both parties will still be held responsible after the divorce.

If an ex-spouse violates an order of the family court by not making good on a debt, the court may impose sanctions. However, creditors do not become involved in family court matters. Legal responsibility for a debt is determined by who signed the original credit agreement. If both spouses signed, creditors may pursue both for payment.

In order to protect your credit during divorce, you should speak with your divorce lawyer [] about debt responsibility. During divorce settlement negotiations, requests may be made for spouses to have joint debts refinanced. This serves to remove liability from the spouse who does not take responsibility for a debt in the divorce settlement agreement and protects the other spouse's credit.

It can be helpful for you and your divorce lawyer for you to obtain copies of your credit report from the three major credit reporting agencies. An examination of your credit reports can help you identify joint debts and open accounts you may have forgotten about.

Creditors generally will not remove a name from an account based on a divorce because it is not in their best interests to do so. If both spouses are legally responsible for a debt, the creditor may pursue both for payment. By removing the payment obligation for one of the spouses, they would effectively reduce their chances of collecting payment of the debt by 50 percent.

During divorce, any joint accounts without a balance due should be closed. Any joint accounts with balances should be paid off, then closed or steps should be taken to refinance the debt so that it becomes the sole responsibility of one party.

If a marriage is over, the credit connection should end as well, if possible. By taking steps to separate accounts and credit during divorce, you can protect your credit.

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