"Making It Make Sense" (SM) with Dr. Pamela Brewer
Getting Divorced and Dividing the Debts By Mark Morrison
There’s a lot of ground to cover once the decision is made to dissolve your marriage. A huge area of concern for many couples is in the fair division of debts you’ve accumulated during the course of the marriage. There are measures you can take to keep financial damages to a minimum. For instance, you should each have good credit on your own. If you don’t, it may be smart to put off the divorce until you can establish at least a little credit in your own name. You should also have your own bank account. To keep jointly shared debts from becoming your sole responsibility, pay them from joint funds, such as a savings or checking account belonging to both of you. Once that’s done, all joint accounts need to be canceled. If you don’t, creditors will continue to hold both of you liable for all accounts held in both your names. Canceling joint accounts also eliminates the possibility that your spouse will run up large balances and then not be able to pay. If your name is still on the account, you’ll be held responsible for paying if your spouse is unable to or simply doesn’t make the payments. In addition, if your spouse makes late payments or for whatever defaults on the joint accounts, the negative impact of those actions will be reflected on your credit as well. Then you’ll have to work on rebuilding your credit, even though it wasn’t your fault. If, through no fault of your own, some of your joint accounts have a poor credit history, you can write to the credit bureau and tell them why the accounts have negative comments on them. Ask them to include your letter of explanation in your credit file permanently to help separate yourself from the poor ratings. Whether you have joint credit or individual credit histories, you need to get a copy of your credit report from the major credit bureaus to make sure it’s correct. If there are any problems with it, or discrepancies contained in the report, these need to be corrected before you proceed with the divorce. It’s possible your ex may declare bankruptcy. If it happens during the divorce process, in most cases the proceedings are stopped, pending completion of the bankruptcy. If it happens after the divorce is final, it can cancel any debt owed to you by your ex as part of the settlement. It won’t cancel child support, alimony, or tax debts. Bankruptcy should be a last resort and only used after all your other options have been considered. It will stay on your credit report for 10 years and filing for bankruptcy makes it even harder for you to build good credit. Before you make the decision to declare bankruptcy, it’s a good idea to talk to a financial advisor or professional credit counselor. Dividing your debts can be done fairly, as long as lines of communication remain open. By paying off as many of your joint accounts as possible before the divorce, you each have a chance to start over with a clean slate.