Divorce and Credit

According to Experian, a credit reporting agency, “Many divorcing couples are confused by the role of the divorce decree. A divorce decree may specify who is responsible for accounts opened during the marriage, but it doesn’t break the contracts with the lenders. If the spouse responsible under the divorce decree is unable or unwilling to pay and the contract has not been changed by the lender, the late payments still will appear on both credit reports and will have a negative impact on credit scores for both individuals.”

Getting divorced is never easy, even when both parties agree it is for the best. So, it is understandable that you may not fully understand what is involved in a divorce decree. Simply stated, a divorce decree states who is responsible for which accounts. However, this does not remove the other person from that account. Meaning that if the other party does not pay on his or her debts, you are responsible for them.

While you may be tempted to make rash financial decisions when under duress, perhaps you want to hurt your soon to be ex-spouse, it is critical for you to remember that any impulse decision you decide to make with your joint accounts will also impact you in the long run. Keeping things as level headed and civil as possible is critical.

In the event of a divorce it is also important to understand if you live in a state with community property laws. In the United States these states are Arizona, Washington, California, Idaho, Louisiana, Indiana, Nevada, New Mexico, Texas, and Wisconsin. Under community property law you may be held responsible for your spouse’s debt, even if you are not listed on the account.

If you are in the process of a divorce, just remember these few things. First, be up front about your financial situation when in the divorce proceedings. Second, do not make any rash financial decisions out of a desire to hurt your ex-spouse. Third, keep a level head and move through the process as quickly as possible.