Divorce isn’t just the legal end of a marriage. It’s also the end of shared finances, requiring couples to divide their property, assets and debts, including credit cards, mortgages and other loans.
Failing to manage your debt carefully during and after divorce can cause problems even years later. The following tips will help you protect your credit and finances:
Check your credit report
Start by reviewing what credit accounts you have, especially if you haven’t been involved in the day-to-day household finances. Your credit report provides a comprehensive history of your credit accounts and loan payments. It will list all the accounts you’ve ever opened and their status, and show you what you owe.
You can get a free copy of your credit report from NerdWallet or Annual Credit Report.
Also, make sure to keep up with payments on open accounts throughout the divorce process.
Freeze or close joint credit accounts
Joint credit accounts with your spouse can create conflict during divorce. For instance, your spouse could increase his or her spending on a joint credit card.
If an account has your name on it, you’re usually responsible for it regardless of who incurred the debt or what the divorce decree states. Even if your settlement says your spouse is responsible for the debt, if he or she misses a payment it will hurt your credit. Your divorce decree can’t nullify your original legal contract with the creditor.
You can protect yourself by closing accounts that have been paid off or freezing accounts that remain open. Alert your credit card companies and banks that you’re getting divorced and request a freeze or require both spouses to authorize any future transactions.
Also, consider asking the court for a temporary restraining order to prohibit either spouse from engaging in questionable spending involving your joint funds.
Pay down debt before the divorce is final
Eliminating joint debt helps reduce complications, not only during the settlement negotiations, but also when the divorce is over. Even if your ex-spouse is responsible for a joint credit account as part of the divorce settlement, you’re still liable for that debt if your ex-spouse doesn’t pay.
Make sure post-divorce changes are completed
Once the divorce decree is signed, follow up to make sure that agreed-upon changes have been made to your credit accounts. For example, if your spouse is responsible for refinancing the mortgage to remove your name from the account, check that he or she does this in a timely manner.
Close any remaining joint or paid accounts. Otherwise, you could find yourself with a nasty surprise later. Even if a joint account has a zero balance, until it’s closed your ex-spouse could take money or spend from the account.
Use a credit-monitoring service
One of the main reasons to manage debt during divorce is to protect your credit scores. Consider using a credit-monitoring service to alert you when there’s a change to your credit score or a new account is opened or closed. Poor credit can keep you from getting a mortgage or car loan — or just moving on with the rest of your life.
Divorce can be an emotionally wrenching time, but with some thought and planning you can keep it from becoming a debt nightmare.