How Do I Financially Divorce My Ex?

Fifty percent of all marriages end in divorce, so if you’ve ever been married, the chances of yours being a party to a divorce is high.  It’s an emotional time for many reasons: a divorce hits you at all levels: family, home and money. These emotions may not help you make the sanest decisions when it comes to finances.  When it’s all said and done you want things to be over – what’s the best way to separate your finances from your ex’s?

The Divorce Decree

Depending on how long you’ve been married, your financial situation could be very intertwined with your ex’s.  Joint accounts for checking, savings, loans and credit cards could all be involved.   During your negotiations with your spouse, joint debt responsibility will be divided between the two of you.  Lawyers will draft careful agreements spelling out which debts remain yours after the divorce and which debts will belong to your ex.  This agreement will be taken to the court and after some more negotiation; the final court document will be created and entered into the records.  A judge will pound his or her gavel and make the divorce decree legal.

Divorce Decrees Are Not Recognized by Creditors

Whenever you have a joint account, you and your co-signor have joint responsibility for the debt.  This means that if one of you defaults on the loan, the other party will be responsible for the debt.  Despite the fact that you have a legal divorce sanctioned by the courts, creditors will still hold you responsible for the debt if your name is on the account.  You still have a legal agreement with the creditors – they were not there in court with you and did not agree to modify the terms of the original contract you had with them.   A divorce decree is an agreement between you and your ex; the creditor is not involved.

Joint Accounts

I heard it countless times in my career as a credit journalist (and during this time I advised many people): “My ex stopped paying on his/her account and now my credit is ruined.”  What happens here is that when the ex is late or defaults on an account, an account you are responsible for per the terms of your original agreement, information about the late or the default makes its way to your credit report.  Whether it’s because of spite or simply that the ex cannot make the payments, your ex can really sink your credit score if they so choose (of course they are sinking their own score as well).

It’s not easy to “take your name off” a joint account.  The account must be closed (and in the case of a credit card, the balance must be zero) and a new one needs to be opened in only your spouse’s name.

Joint Mortgages

In the case of a mortgage, it can be hard to separate the account, as you or your ex may not be able to qualify for a loan as an individual and you both are stuck with a joint mortgage.  If you find yourself in this position, don’t quit claim the title of the home over to your ex – you will then be responsible for the mortgage, but not own the house!  If neither of you can qualify, it may be necessary to sell the home to divest yourselves of the mortgage.

Joint Credit Cards

If the account is a credit card account, and there is a balance, you can open a new account in your ex’s name and do a balance transfer (Citibank has a program where you can do a $0 fee balance transfer over to a new account).  If your spouse cannot qualify for a new credit card and you have a balance on some account that you cannot pay off immediately, it’s best to close the account so no new charges can be made and to keep an eye on the account to make sure the balance is being paid off and the payments are being made on time.

Joint Auto Loans

If you have a joint auto loan, you can always refinance the car through a credit union or bank.  However, if the car loan is worth more than the car, or if you or your spouse don’t qualify alone with your credit and/or income, you may have a hard time getting a new loan and may have to stick with your joint account and hope for the best.   Just like mortgages, whatever you do, don’t sign over the title of the car to your ex while you still have a join auto loan.

How To Prepare Financially For Divorce

If a divorce is imminent, here are some steps you can take:

1. Close all joint credit cards. If this leaves you with no credit cards, open new ones in your name alone.
2. Pull your credit report. Note all the accounts that are joint on your report – there will be a notation. It’s not uncommon for spouses to open joint accounts secretly and you want to make sure you know where you stand.
3. Do not sign over titles to property if you must keep joint account. This can lead to a position where you are responsible for the loan, but don’t own the property.  If you still own the property and your exis having trouble making payments, you may be able to get your ex to agree to a sale in order to pay off the troublesome loan.
4. Close all joint checking and savings accounts. When you do so, you must of course divide the funds fairly.  Your lawyer can help with this often sticky situation.

What To Do if Your Ex Misses a Payment or Defaults on a Joint Account

The reality is, if you want to keep your credit from being damaged, you may have to step in and make the payment for your ex.  This may be an unappetizing solution, but you have to weigh how important your credit rating is to you: does the possibility of canceled credit card accounts, higher insurance premiums or denied when you apply for other loans excite you?  If not, you may need to swallow your pride and fork over the money for the payment.

If your spouse defaults on a loan, you may be able to go after them legally in court.  They signed a court-sanctioned agreement (the divorce decree) taking responsibility for the loan; defaulting is a breach of contract.

Lastly, if your credit was damaged due to a divorce, the professionals at creditrepair.com have experience in this area and have successfully argued to credit bureaus and creditors to remove a late payment or default from your credit report causes by your ex’s tardiness.