Divorce Means You’re Leaving Your Spouse, Not Lenders

Divorce can be a trying time in anyone’s life and the fact of the matter is that even beyond the emotional turmoil separating couples might go through, there are often many other considerations to think about as well. Unfortunately, that often includes credit card debt and other outstanding balances.

One of the many aspects of dealing with finances in divorce that can take some getting used to and may be somewhat difficult to deal with is the simple division of debt between both spouses. In many cases, debts of all kinds are something carried jointly by the two parties, and what can be particularly tricky is figuring out who owes what and why. Even still, the most important part of the process may be making sure that both sides are able to maintain whatever good credit score they might have built up over the course of their marriage.

Come up with a plan
Obviously divorce can often be a trying or even acrimonious process, but lenders won’t have much sympathy for those couples who begin missing payments. As such, it’s often important that divorcing couples know who is going to cover what during the process. This is particularly true for accounts that are held jointly, because no matter who is responsible for racking up the balance, the fact is that both are considered to be equally obligated to pay it, and any missteps with the account will likewise be equally shared where their credit ratings are concerned.

For instance, the single largest factor related to one’s credit score, accounting for 35 percent of the entire rating, is the ability of a borrower or borrowers to make payments on time. That means missing even one payment deadline can send a person’s score tumbling, and make it both more difficult and more expensive to obtain new lines of credit in the near future, which may be important for separating couples who need to get credit in their own name once the divorce is finalized. Therefore, determining who is going to pay into what accounts during the divorce process is a good way for both sides to protect themselves and their credit.

Dealing with debt on joint accounts
In addition, it’s also important at this time to take all possible steps to make sure any jointly-held debt is eliminated by any means necessary. In general, experts say that by the time a divorce is finalized, there should be no such outstanding balances because it can be difficult for both sides to have set obligations to those accounts after the process is complete.

So as with figuring out who will pay into what accounts throughout the process, divorcing couples will also have to work to reduce what can sometimes be thousands of dollars or more in debt. Another potentially beneficial way to do this is for both sides to figure out a fair division of all outstanding debts and transferring whatever balances they’re going to end up with to new accounts that are in their name only. This can also be helpful because in some divorces, one spouse has been known to run up debt on joint accounts simply as a means of trying to make ends meet while the separation is ongoing, particularly if they didn’t have a major source of income of their own during the marriage.

Moving outstanding debts from old accounts to new ones might also come with the added benefit of giving both parties access to balance transfer deals that can make their obligations easier to deal with for a while. These days, many credit card lenders extend new borrowers interest rates as low as 0 percent for a period of months or even years, which can make outstanding debts far easier to pay off and therefore ease the transition back into single life for both spouses.

And for those who might not be able to avoid bringing jointly-held debt into their post-divorce lives, it may be important to make sure language is built into the settlement that clearly explains what each spouse’s responsibilities are when dealing with those balances.

Make sure all other credit is up to snuff
Again, divorce can be trying, but it’s not a time to shirk debt responsibilities no matter how tough things get. In addition to making sure all balances are paid on time and in full, both spouses should also try to make sure their individual accounts are not carrying too much debt by themselves, and are generally in good standing so that each can have as clean a slate as possible once the process ends.

Both spouses may also want to order copies of their credit reports so that they can determine where they stand, and also check the documents over for unfair markings. These entries can have a large negative effect on one’s credit rating, but working with a credit repair law firm might be able to fix the problem.