Divorce and Your Credit Rating Medical debt can be considered joint family debt, and if a hospital or collection agency for a hospital can not collect from one spouse they will be looking to the other spouse to pay up. This include them reporting the bad debt to both the husband and wife's credit report. This includes credit cards, installment loans, auto loans, and the such. The creditor can go after both parties on joint debt. When going through divorce, usually the couple goes to the court and asks for a division of who owes what and set it in print in the divorce papers. The problem is that, the creditors were not represented nor did they agree. They still hold the right to go after both parties if one fails to pay. If that happens the injured spouse needs to collect court documents and forward them to the creditor or collection agency proving that they were released from obligation by the court. If the creditor or collection agency refuses to accept this, then the only remedy is for the injured spouse to pay the debt off their self. The injured spouse would then have to sue the ex-spouse to be compensated for the money paid. The injured spouse needs to take a copy of the divorce papers to the court house to prove their case. If the injured spouse wins a judgment against the ex-spouse then a judgment is entered on the ex-spouses credit record. Should the ex-spouse pay the debt back, then it is up to the injured spouse to file a release with the court house so that the credit report can be updated that the ex-spouse did in fact pay. What commonly happens is if the ex-spouse who didn't pay gets a judgment they run to the court house and file bankruptcy and include the injured spouse so that they can't seek reimbursement for the debt the injured spouse paid. To avoid this, the couple, when they know they will be getting a divorce, should call all of the creditors and negotiate with them to remove one party off of the account, or if they can't do that ask that the account be closed and separate accounts be opened in their individual names. Sometimes the creditor will agree to this. This should be doable if there is no current balance on the account, otherwise the lender may inform the couple that the balance has to be paid before they agree to this. I suggest that if there is a large balance that can't immediately be paid off, then the spouse responsible for the debt should seek obtaining a new credit card or installment loan to balance transfer their debt off of the joint account.
Not as easy as it seems. A lot of times the individual parties won't have the income or meet requirements to get the credit on their own. So they end up with a closed account with good history, a new account with lower limit that will have a higher utilization, and lower scores. If the account has no balance, MAYBE the creditor will remove one name. One of my banks told me the only way to remove my ex was to submit a death certificate. If there is a balance, no matter what court papers may say, both parties are responsible if it's a joint account. You're right--the only recourse is to pay and sue the ex. Trust me, it doesn't work very well. Best to bite the bullet and find a way to pay it off. I paid off over $75K of unsecured debt. I had three or four jobs for a while. Cut the cable, cancel the newspaper and magazines, take your lunch. It's tough but it can be done. If you can qualify for low rate balance transfers, get a new card and transfer some to that. But don't think because the property settlement says the other party is responsible that you're off the hook.
So true, so true, I really hate bad feeling from a divorce just to escalate when it comes to separating financial obligations. When I went through my divorce I was very fortunate, my job at the credit bureau influenced my relationship with the bank. The bank just happened to be a credit bureau customer. They knew me already, when I went through the divorce my ex showed up with me and we spoke to the bank officer. They transferred the title on the car, and they removed me off of the loan that very day. I was also lucky that all credit cards were separate and I didn't have to fight any creditors on that count. If the couple can't get the creditors assistance in the matter - it just becomes a recipe for disaster - just rolls down hill from there.
So true. If you own a house, the mortgage needs to be refinanced. If not, you may find yourself not owning the property, but paying for it anyway! That should be something that you should do before you sign the final papers. It's amazing how many people find the mortgage company coming after them, and they say "but it's his/her house" only to find out that until the mortgage is refinanced, they are liable for the mortgage, even if they've signed away the title to the property.
Very good point, thanks for adding that, I should of added that, but it is an area I don't know too much about. I did have a house, but in our case it was foreclosed on. Houses are a lot harder to get out from under. I think a lot of the time, when one spouse finds they are faced with owing that kind of debt they look to bankruptcy options for relief. I often wondered how many Bankruptcies were filed each year due to Divorce.
Well, my ex and I were both in halfway decent shape. Enough that we wouldn't have let a house get foreclosed. We owned two houses, and in the divorce we each got one. My name was on his mortgage for years, until he sold it. I refinanced mine after a few years to get cash to pay off the other bills I got stuck with. He may have dumped the credit cards on me, but at least he kept up his mortgage payments. Of course, they were low and the house was being rented and the rent covered it. But still, it could easily have devolved to a nasty situation.
Yeah in my case the rug got ripped out from under me, left my job due to illness, went through divorce, and within 6 months I was approved for disability. Yeah like burned all of them bridges. Can't fix any of that, still have the bad credit to show for it. But now I am re-married and just went back to college for business certificate. The most stupid thing I did was transferred a big chunk of my ex's debt into my name. That was right before he said he wanted the divorce, so I walked right into that one.
Well, that may be true in some states and can depend upon whether or not the medical or any other debt was signed for by both parties. Whether or not a debt of any kind can legally be attributed to both marital parties can be highly dependent upon whether or not the parties are residents of a community property state. Residents of community property states are jointly responsible for the debts of either party whether they signed for the debt or even knew the debt existed or not. An example might be a situation where the husband was at work and the wife had an accident of some kind and was transported or went to the doctor or hospital. She signed for her treatments and did not inform her husband until after he returned from work or at some later point in time. Maybe he was even out of state at the time. In a community property state both would be liable but not in a non-community property state. Again, depending upon the type of state and whether or not both parties signed for the debt That's misleading too. Divorce court judgments are only binding upon the participants of the divorce, but has no force or effect upon anyone else, creditors or collection agencies included. Yes, but that does not necessarily mean that the credit reports will be updated. Might happen and it might not. Obviously couples who allow mixing of business with pleasure aren't thinking very well. That should never be allowed by either spouse. Each should always keep their private and public lives separate. Even if one of the parties does not work and has no income they should still keep their private and pubic lives totally separated. We see that mistake committed millions of times over with tragic results yet people never seem to learn. Take the case of a wife who gets married to a man who is the sole earner in the marriage. That continues for their entire lives, the wife never works outside the home. The marriage continues for say 50 years and the man retires and dies at a relatively young age, say 68 years of age. The wife has no income and no credit in her own name. She is in one heck of a situation financially speaking. Her income has been reduced to well below poverty level by having to rely on his retirement benefits which isn't much. With no credit and little income she is in one heck of a shape. She can't even get credit after his death. She can't buy a decent car and can't do a lot of things she might have been able to do had they kept their public lives completely separate and had developed her own lines of credit.
Ah, yes you are right, sorry I keep forgetting about them people not living in community property states. It is nice if you happen to live in one of these states. I remember back in my 1st marriage when we got a house the power company called me and informed me that my then husband had a 10 year old debt with them. I tried explaining that that was with his previous wife, but they still insisted that I pay it if I wanted power turned on. That irked me, but it was a small amount so I paid it.
