Protecting your credit after a divorce

During a divorce, couples must figure out how they are going to split up their shared assets. At the same time, they must also figure out what they are going to do with their shared debts. Given that most households in the U.S. carry some level of credit card debt, this can be a major undertaking and is not something to be overlooked or taken lightly.

Ending joint debt accrual

Because a creditor considers anyone named on an account to be financially responsible for the debt, it is recommended by Motley Fool that once the decision to get a divorce has been made couples close credit card accounts to prevent any further debt accrual.

Divorce decrees and creditors

U.S. News and World Report explains that creditors do not take their collections guidance from a divorce decree. This means that even if a decree identifies one spouse as responsible for a specific debt, the bank may attempt to collect unpaid balances from the other party. For this reason, many couples pay off their joint debt before their divorce is complete. If this cannot be done, a balance transfer to an account in one person’s name only may be wise as it can eliminate financial liability for the other party.

Bankruptcy and creditors

If a spouse who is supposed to repay a joint debt later files for bankruptcy and the joint account remained intact, the creditor may again attempt to collect on the debt from the other person. Any late or missed payments may also be reported against their credit report regardless of the terms of their divorce decree.