Roy Weddleton
  Concord, NH 03301
(603) 228-1360 • roy@granitelaw.com

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Divorce and Your Debts

A Tale of Woe
Mary and John were recently divorced and their divorce decree stated that John would pay the balances on their five joint credit card accounts. Of course, months later, after John neglected to pay off these accounts, all five creditors contacted Mary for payment. She referred them to the divorce decree, insisting that she was not responsible for the accounts. The creditors correctly stated that they were not parties to the decree and that Mary was still legally responsible for paying off the couple’s joint accounts. Mary later found out that the late payments appeared on her credit report.

If you do not know how your credit accounts are set up, read this:

  1. Individual Account: Only your income, assets, and credit history are considered by the creditor. Whether you are married or single, you alone are responsible for paying off the debt. The account will appear on your credit report, and may appear on the credit report of any "authorized" user. Although, we deal with New Hampshire, you should be aware that in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse still may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other.

    The advantage of an individual account is that no one can negatively affect your credit record, except you. The disadvantage is you may have difficulty getting credit if you're not employed outside the home or have a low-paying job. You may need your spouse's income to present a stronger financial profile.

  2. Joint Account: Both you and your spouse’s income, financial assets, and credit history are considered for a joint account. No matter who handles the household bills, you and your spouse are responsible for seeing that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977).

    The major advantage of a joint account is the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card.

    The disadvantage is that each individual is responsible for the entire debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don't pay them can hurt their ex-spouses's credit histories on jointly held accounts.

What to do if you divorce or are planning to divorce:

  1. Pay special attention to the status of your credit accounts. If you maintain joint accounts, it's important to make regular payments so your credit record won’t suffer. As long as there's an outstanding balance on a joint account, you and your spouse are responsible for it.

  2. If you divorce, you should close joint accounts or accounts in which your former spouse was an authorized user. Or, ask the creditor to convert these accounts to individual accounts.

    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 your 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 you have questions or want additional information,
call Attorney Weddleton at 603-228-1360 or e-mail him roy@granitelaw.com.
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