 
When couples divorce, many factors can and will impact both parties credit. The type of credit accounts and bank accounts is very important when settling a divorce. Regardless of the status of the divorce, outstanding balances must be managed and debt repayments are still essential. Any outstanding balances on both joint and individual accounts must be repaid as agreed to under the borrowing terms. If payments on a joint account are not made as arranged, negative information can be applied on the credit history of both parties.
We can help you maintain or regain your good credit status after and throughout divorce proceedings.
Joint accounts can be converted into individual accounts during divorce. A joint account cannot be closed simply due to changes in marital status, but only on the request of one of the individuals. The individuals will not necessarily be eligible for the same credit status they enjoyed while being married, and a creditor may require a new application for credit based on an individual.
Mortgages and home equity loans usually require refinancing in order to remove one party from the agreement.
Credit accounts fall into two categories; individual and joint. Either type of credit account can include an 'authorized user' who is permitted to use the account. Authorized users of an account can have the credit history of that account reflected on their credit history.
However, credit users are not liable for payment of that account. Only the person(s) whose name(s) are on the account are deemed liable for repayment of the account.
Individual Accounts
The ability to open an individual account rests on that person's credit history, income, assets, etc. and only that individual is responsible for payment of the account. This account can include 'authorized users' who are not liable for outstanding balances. If the authorized user is a spouse, any credit information reported will be reported on the spouse's report as well. In many states however, debts incurred on individual accounts over the duration of a marriage can become both spouse's responsibility and a credit report on an individual account can be reflected on a spouse's credit report.
Joint Accounts
Both spouse's financial information, including assets, credit history and income are considered when opening joint accounts. Both spouse's are responsible for debt repayment and the credit reports of each spouse will reflect the joint account. Joint accounts are often useful for those individuals who are unable to secure credit based on their own financial history or situation. Having said that, after divorce, regardless of the divorce agreement and individual obligations, both parties remain liable for repayment of the debt. Negative information about joint accounts can be included on both spouse's credit reports.
The Legal Information Institute offers in depth information about divorce.
|
