Divorce is difficult for many reasons and in many ways. From a practical financial standpoint, getting a divorce means separating the income, assets and debts of two adults who had previously been operating as a single household.
When the emotional aspects of divorce get mixed in with an already complicated financial split, things can get messy. In this week’s posts, we’ll discuss some ways to make a clean financial break and minimize the risk that your spouse’s money decisions ruin your current and future credit.
If you and your spouse share credit card accounts, you are both responsible for the balances. As soon as you decide to file for divorce, there are some steps you can take to protect yourself from joint financial obligations going forward. In the case of credit card accounts with outstanding balances that can’t be paid off immediately, the first thing you should do is request a hold or freeze on the account. This keeps the account open but prevents either spouse from making new charges.
Freezing the account is important for a couple reasons, including the fact that it prevents your spouse from running up huge debts just to be vindictive. Joint accounts can’t be closed if there is an outstanding balance. However, if the account is in your name and your spouse is an “authorized user,” you can have him or her removed from the account.
Make sure that you also keep an eye out for joint lines of credit that are still open but don’t get used very often. These should also be closed or frozen if possible. A good example would be a credit card offered by a retail store.
In the case of joint bank accounts, it’s a good idea to close these accounts and open a new account in your name only. Your spouse should do the same.
Please check back later this week as we continue our discussion.
Source: Fox Business, “Debt and Divorce: 5 Steps to Make a Clean Credit Split,” Dawn Papandrea, July 14, 2014