Credit Cards and Divorce
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Credit Cards and Divorce: What You Need to Know
Overview
Going through a divorce involves disentangling various aspects of life, and handling joint debts is one critical area to address. This includes settling matters related to joint credit cards and mortgages. It's crucial to understand how these debts affect your credit rating, even if your divorce decree states you aren’t responsible for them.
Types of Credit Card Accounts
Credit card accounts can be individual or joint, and this distinction is vital for credit history. Having a card with your name on it doesn’t necessarily mean it's a joint account. An individual account holder can authorize others to use the card, but remains solely responsible for paying the bill.
Joint accounts are different; both parties are accountable for any debts. Additionally, if you live in a community property state, you might still be liable for your ex-spouse’s individual account debts.
Protecting Your Credit During Divorce
To safeguard your financial future during a divorce, take the following steps:
1. Freeze Joint Accounts
Immediately request a freeze on all joint credit accounts to prevent further charges. While creditors typically can’t close accounts with outstanding balances, freezing them stops additional expenses.
2. Remove Authorized Users
Take your ex-spouse off any individual accounts where they are authorized users. This ensures that only you can make charges, protecting your credit.
3. Convert Joint Accounts
Ask credit card companies to convert joint accounts to individual accounts for the person who will take responsibility for them. Be aware that creditors might require full payment of the balance or that the responsible party applies for credit in their name before transferring the balance.
4. Allocate Debt Responsibility
Agree with your ex-spouse on who will pay specific debts in full. Remember, this agreement does not bind the credit card company; if your ex defaults, you are still responsible. You can legally pursue repayment from your ex-spouse, but this is often avoided.
By taking these steps, you can better manage credit and debt during a divorce, helping to protect your financial future.
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