Credit Issues with Divorce
Rosemary K. Heins, Extension Educator — Family Resource Management
Revised June 2013 by the author.
A divorce decree doesn’t change the contracts you made together as spouses to pay your bills. When you divorce, each of you remains fully liable for your debts.
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 you 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.
If your spouse agrees to pay off a joint debt, make sure this agreement gets included in the written divorce settlement. If your ex-spouse is ordered by the court to pay a debt but doesn’t pay it, the creditor may force you to pay it. If that happens, you can ask the court to order your ex-spouse to pay you back. The court can also find your ex-spouse in contempt for violating the court’s order.
You can prevent credit obligations from making divorce even more difficult and re-establish your own distinct credit lines after divorce occurs. Consider the following:
- Obtain the credit reports of both you and your spouse when starting the divorce process to verify the extent of credit obligations. (Information on obtaining credit reports is available at annualcreditreport.com or by calling 1-877-322-8228.)
- During divorce negotiations, keep your joint bills current, even if it means paying for your spouse.
- Be sure there is a detailed accounting of all account numbers, debt amounts, and the person responsible for credit card and debt in the divorce decree.
- Don’t leave the marriage with open credit lines. If you applied jointly for that line, each of you remains liable, even for debts contracted after you divorce. To stop any liability for future debts, close accounts. To close an account, call the bank, follow up with a letter and keep a copy of the letter. When you cancel a card, the lender can hold you liable for any debt on it already.
Upon your divorce settlement, you and your ex-spouse might consider obtaining individual consolidation loans to cover your share of the joint bills. Pay off the joint bills with your individual loans and close all joint accounts. This helps ensure you’ll be responsible only for those bills you agreed to pay. It also will help you establish or reestablish credit in your own name.
After the divorce, get copies of your credit reports from all three credit reporting agencies. Obtain all three reports through www.annualcreditreport.com or by calling 1-877-322-8228. For additional help on divorce and credit issues, consult with your attorney.
Federal Trade Commission. (2013). Your equal credit opportunity rights. Washington, D.C.: Federal Trade Commission.
Mid-Minnesota Legal Aid and Legal Services State Support. (n.d.). Marriage and debts. St. Paul, MN: Mid-Minnesota Legal Aid and Legal Services State Support.
Debt Load (407 K PDF) — Unfortunately, debts do not just go away after a divorce or separation. This fact sheet reviews what will happen to your debt when you go through a family transition.
Divorce and Your Credit — Consolidated Credit Counseling Services, Inc. — Outlines easy steps to take during a divorce to protect yourself and your credit.