You'll need to divorce your finances, too
Credit Cards in a Divorce
by Bill Hardekopf
Divorcing Your Finances
Credit Card Tips During a Divorce
Divorced Mom's Finance
Divorce is more than ending a marriage. It is also requires splitting up your finances, including credit card debt. No matter how emotional the divorce may be, dealing with the debt requires a solid plan and cool heads. It may also require a lawyer. Here are some credit card tips when going through a divorce:
- Start with an investigation of all accounts for both spouses. Get a copy of a credit report from all three agencies. Make a list of every open credit account and whether it is a joint or individual account.
- Close all joint accounts. Joint accounts are held by you and your spouse together, and both of you are equally responsible for the debt, regardless of how the debt is distributed in the divorce. If an account is left open, your ex-spouse can add more debt, make a late payment, miss a payment or default, and you will also be held responsible. The creditor reports account activity to the credit bureau in both of your names. This affects the personal credit score for both individuals. It will not only be costly for you, but can trigger a rate increase for all of your other credit accounts.
When you close the account, notify the credit card company about the divorce with a certified letter. Ask them to provide a current account statement and tell them that you do not intend to be held liable for any debt accumulated after the date of the written letter. Request that they put the account on inactive status so no new additional charges may be added, and stipulate that once the balance is paid in full, the account is to be closed completely. Follow up with a phone call to your credit card issuer.
- Remove your spouse's name from each other's individual accounts. This will limit your responsibility for new debts from your spouse. If your spouse is an authorized user for any of your accounts, revoke the authorization. Send the request by certified mail.
- If at all possible, pay off all credit card debt before the divorce is final, even if you have to liquidate marital assets. If you don't have enough cash, think about dividing up the debt, transferring your share to your own cards, and then canceling the joint accounts. If paying off all the debt is impossible, then create a payment plan and make sure that you continue making payments on time, so you won't hurt your credit score and incur the late fees. Monitor your account each month to make sure your ex-spouse is also making the correct payment. Pay off your balance as quickly as possible.
- If the two of you can't reach an agreement on your own, hire a mediator or financial planner to help you come to a resolution.
- After the divorce is finalized, monitor your credit report to see if any errors or problems pop up from the joint credit you had during your marriage. You can get a free copy of each report once a year from AnnualCreditReport.com. Sign up for a credit monitoring service if you are concerned about identity fraud or the possibility of new joint accounts opened after the divorce.
- If you don't have a credit card in your name only, apply for one now. It may be easier to get a credit card in your name now than after the divorce.
- If you are the one who moves out, notify your credit card companies of your change of address. Submit a change of address card with the Postal Service.
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Bill Hardekopf is CEO of LowCards.com, a site that simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.
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