Credit and Divorce
By Cindy Morus
Mary and Bill recently divorced. Their divorce decree stated that Bill would pay the balances on their three
joint credit card accounts. Months later, after Bill neglected to pay off these accounts, all three creditors
contacted Mary for payment. She referred them to the divorce decree, insisting that she was not responsible for the
accounts. The creditors correctly stated that they were not parties to the decree and that Mary was still legally
responsible for paying off the couple’s joint accounts. Mary later found out that the late payments appeared on her
If you've recently been through a divorce—or are contemplating one—you may want to look closely at issues
involving credit. Understanding the different kinds of credit accounts opened during a marriage may help illuminate
the potential benefits—and pitfalls—of each.
There are two types of credit accounts: individual and joint. You can permit authorized persons to use
the account with either. When you apply for credit—whether a charge card or a mortgage loan—you'll be asked to
select one type.
Individual or Joint Account
Individual Account: Your income, assets, and credit history are considered by the creditor.
Whether you are married or single, you alone are responsible for paying off the debt. The account will appear on
your credit report, and may appear on the credit report of any "authorized" user. However, if you live in a
community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or
Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts
of one spouse may appear on the credit report of the other.
Advantages/Disadvantages: If you're not employed outside the home, work part-time, or have a low-paying
job, it may be difficult to demonstrate a strong financial picture without your spouse's income. But if you open an
account in your name and are responsible, no one can negatively affect your credit record.
Joint Account: Your income, financial assets, and credit history—and your spouse's—are
considerations for a joint account. No matter who handles the household bills, you and your spouse are responsible
for seeing that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must
report it in both names (if the account was opened after June 1, 1977).
Advantages/Disadvantages: An application combining the financial resources of two people may present a
stronger case to a creditor who is granting a loan or credit card. But because two people applied together for the
credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations
to each spouse. Former spouses who run up bills and don't pay them can hurt their ex-partner's credit histories on
Account "Users" If you open an individual account, you may authorize another person to use it. If
you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must
report it in your spouse's name as well as in yours (if the account was opened after June 1, 1977). A creditor also
may report the credit history in the name of any other authorized user.
Advantages/Disadvantages: User accounts often are opened for convenience. They benefit people who might
not qualify for credit on their own, such as students or homemakers. While these people may use the account,
you—not they—are contractually liable for paying the debt.
If You Divorce If you're considering divorce or separation, pay special attention to the status of your
credit accounts. If you maintain joint accounts during this time, it's important to make regular payments so your
credit record won’t suffer. As long as there's an outstanding balance on a joint account, you and your spouse are
responsible for it.
If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized
user. Or ask the creditor to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the
request of either spouse. A creditor, however, does not have to change joint accounts to individual accounts. The
creditor can require you to reapply for credit on an individual basis and then, based on your new application,
extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing
to remove a spouse from the obligation.
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