Divorce means separating your credit. This is an opportunity.

On behalf of Bryson Law Firm, PLC | February 15, 2019 | Family Law | 0 comment

Divorce is sometimes associated with debt. In some cases, this is simply because the parties have accumulated debt over time. In others, people find it hard to afford two households where one was possible before. Whatever your circumstances, divorce gives you the opportunity to build a new credit rating separate from your ex. Let’s start with the basics.

Marital debt, like marital property, is divided in divorce

Arizona considers nearly all property and debt accumulated during the course of the marriage to be community property. Any separate property or debt are yours, but they will generally be limited to things you owned or debt you took on before the marriage, along with personal gifts and inheritances. Community property and debt are generally divided 50/50.

During your divorce negotiations, you may trade assets and debts while still dividing them approximately 50/50. In most cases, you will end up with each spouse the sole owner of some property and solely responsible for some debt.

Protect your credit by eliminating shared debts

Many people don’t realize that a divorce decree assigning a debt to one spouse does not automatically free the other spouse from responsibility. If you were listed as a borrower on the account, you are legally responsible until the creditor releases you. Even if your ex was ordered to pay the debt, you’re on the hook if they fail to do so.

Therefore, prioritize getting rid of shared debts such as mortgages, joint credit cards and the like. If you can refinance the mortgage with only one spouse as the borrower, the other spouse is free from that obligation. It is to the creditor’s advantage, however, to maintain both borrowers as legally responsible. In the case of a mortgage, you may need to sell the house and divide the proceeds to free yourself from the obligation.

Pay down any joint credit cards and other shared debts as soon as possible. Also, if your ex is an authorized user on some credit cards, deactivate that authorization if you can’t pay the card off and close it.

If your ex fails to make a payment, your creditors may come to you. To protect your credit, it may make sense to make the payment and seek repayment from your ex. However, it is crucial to avoid taking on more than your fair share of the debt.

Once you have untangled your finances, you have the opportunity to build your own credit history and score. Follow good money management techniques and monitor your credit regularly by requesting your free annual credit reports from each credit reporting agency through the website www.annualcreditreport.com.