A Better Way to Break Up
The best way to avoid ugly surprises, like overdue debt, is to separate your
credit when you divorce—or, better yet, as soon as you separate.
There are several ways you can do this. For example, you may be able to convert
joint accounts to individual accounts in one spouse’s name or the other.
Some creditors will convert accounts, others will not. If not, you may
have to close the joint accounts and apply for new individual accounts.
When it comes to a mortgage or a home equity loan, you probably will have
to refinance the loan to remove one spouse’s name—and responsibility—from
this major asset.
It’s especially important to keep payments current on joint accounts
before you are able to separate your credit. Otherwise, you risk adversely
affecting both your and your ex’s credit, which will make the future
cost of borrowing higher for each of you.
Generally, it’s better to refinance existing debts than to divide them.
You may want to get individual debt consolidation loans, so you can each pay
off your share of the joint debt and start fresh with individual accounts.
If the divorce isn’t amicable, there are other steps you can take.
You can:
- close joint accounts unilaterally;
- remove your spouse as an authorized user from your accounts; and
- notify joint creditors in writing that your spouse may be racking up
debts, and state that you are not responsible for those debts.
That last step won’t prevent creditors from coming after you in the
event your spouse doesn’t pay. But it will establish that you tried
to behave in a responsible manner.
Next: Establish
Your Own Credit |
