What Happens to Your Credit When You Get Divorced?

by Maricel Tabalba
www.credit.com

Bringing any marriage to an end is a complex process and one of the greatest challenges in divorce is dealing with the financial implications. It’s important to remember that the divorce itself does not impact your credit. The shift in your financial circumstances, however, can lead to credit problems, especially if a reduction in available income leads to missed bill payments or similar problems. It is absolutely necessary to see that your finances are disentangled from those of your partner, especially in the state of Massachusetts.

Joint Bills

There are a lot of financial incentives for couples to hold accounts jointly, but the moment the possibility of a divorce appears this becomes a potential liability for all involved. It’s wise to close joint accounts and bills as soon as possible. This means being thorough, covering everything from checking accounts to rental agreements. Even if you have to live with your former partner while you look for a new place to live, it’s recommended to arrive at some type of agreement in writing regarding living arrangements.

It’s also critical to shut down any lines of credit that might be outstanding. Divorce can become a spiteful process, and an angry former partner might elect to run up debts simply to make things worse. Debts from joint bills will have to be apportioned between the two partners, but they will only be split up when the divorce is finalized. Until then, it’s prudent to reduce your risk exposure by not leaving these joint accounts open.

Debt

Outstanding debts that accumulated during a marriage can be one of the most difficult problems to sort out during the divorce process. Under Massachusetts law, liabilities are divided up in a divorce in the same way that assets are. This is even the case if the debts incurred solely benefited one partner within the marriage.

Both parties are expected to distribute or settle the debts before the marriage ends. If one partner needs to file for bankruptcy, the divorce process will likely be stayed by the court pending the resolution of the petition for bankruptcy relief. It’s also important to note that expenses emerging from the divorce process itself cannot be discharged through Chapter 7 bankruptcy. It might be possible, however, to conclude a divorce and then file for individually for bankruptcy if one spouse makes significantly more money than the other. It may be a good idea to speak with a bankruptcy attorney before deciding how you’d like to proceed with your divorce.

Rebuilding Credit

The time following a divorce can be expensive, and there’s a decent chance that you’ll see a decrease in your credit score. Your biggest concerns should be the size of your overall debt load and your history of paying on time. If it becomes clear that you can no longer afford to pay for a specific item, such as an auto loan, you may want to look into refinancing options. Your goal should always be to get on a payment schedule that you actually have the necessary resources to honor. Also try to refrain from carrying a heavy debt load. Carrying any amount greater than 30 percent of your limit may depress your credit score.

Severing financial ties with your former partner is critical. Spouses sometimes abuse joint credit lines in order to do harm to other partner, even if it means harming their own credit in the long run.

Identify Theft

One of the more commonly overlooked issues at the end of a marriage can be the misuse of credit information by either partner. Third parties seeking revenge may also engage in financially inappropriate behavior, such as illegally obtaining credit reports about one of the former partners to use as leverage to support custody or abuse claims. Your former partner and anyone affiliated with them do not have a legal right in Massachusetts to access your credit record without your permission, even if they have information, such as Social Security numbers, account numbers and birth dates that may allow them to gain access.

If this happens to you, you may be able to file a lawsuit. You should also move to have your ex’s name struck from your credit history, thereby removing one legal argument for why they may’ve sought a report. It’s wise to reconcile all jointly held accounts as soon as possible, with the goal, again, of removing a credible argument for a former spouse seeking a credit report.

The divorce process is about more than two people parting ways. There are major financial implications that can arise from a divorce. However, the important thing is to act as quickly as possible to sever financial ties with your former partner and begin establishing your individual creditworthiness.


Maricel Tabalba is a freelance contributor for Credit.com who is interested in writing about personal finance advice for Millennials and college students. She earned her Bachelor of Arts in English with a minor in Communication from the University of Illinois at Chicago

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