Vision Credit Education, Inc.

When a marriage ends in divorce, many things can go wrong. Some divorces are amicable where everyone remains friends. Most include substantial tension that can cause collateral damage in the forms of financial stress and credit problems.

Credit and financial problems do not end with the divorce decree. For many people, this is just the beginning.

Intentional Damage

Many ex-spouses harbor a grudge, and may intentionally cause financial hardship to their Ex. Sometimes this can include maxing out joint credit card accounts. Other times, it can include skipping payments on joint assets, such as a home or vehicle.

For those who are fairly well-off financially, they may be able to pay off these accounts and prevent credit problems. Most people though have difficulty covering all of the liabilities, especially if they have the added burden of alimony or child support payments.

How to Protect Yourself

If you are facing divorce, you must immediately recognize that creditors generally do not care about court orders. They revert back to the initial contract that you signed with them.

This means that if you cosigned on your spouse’s car loan, you are responsible for making sure the payments are made on-time. If he or she decides not to pay, you must make the payments until the debt is satisfied.  Otherwise your credit report will suffer.

First, you should immediately remove your spouse’s name from any joint bank and credit card accounts. You may find it easier to close the account and open a new one just in your name. If your Ex is an authorized user, you may simply remove their privileges. Arm yourself with any court orders in order to persuade creditors to comply with your requests.

Second, establish a free fraud alert with each of the three main credit bureaus. Do this especially if you suspect your Ex is planning retribution.

Third, work with the lender to remove your name from any asset where your Ex-spouse retains ownership and is responsible for payments. If your Ex has good credit and a healthy debt-to-income ratio, this should not be a problem. Be prepared for any resistance by working with the lender for a resolution. If your Ex does retain ownership of a home or vehicle in which you are a cosigner or co-applicant, understand that you are responsible for making sure the proper insurance premiums are paid on those assets.

Fourth, do your part to avoid escalation. You no longer have to get the last word in. Many divorces end up costing thousands of dollars in attorney fees arguing over hundreds of dollars in debts and assets.

Fifth, make sure that you make all of the payments that you are able to afford. Your secured loans (house and car) are the most important. Consider selling any asset that you cannot afford.

Finally, learn your lesson. Half of all marriages end in divorce. Keeping bank accounts, credit card accounts and smaller assets in only one name can prevent such problems. Coincidentally, this can also prevent financial problems, such as bank overdrafts, for married couples.