If you do not obtain the advice of an experienced lawyer, youre divorce can break you financially if handled incorrectly. Most people in a divorce are far more interested in the property side of the divorce and often overlook the debt side. Divorce settlement proceedings often break down when it comes to dividing up the debt in a fair and equitable manner. It is critical that you have a clear understanding of what you owe individually and jointly when you start the divorce process. How you handle your debts during your divorce can make a big impact on your credit long after the divorce is over.

The first step you should take to protect your credit and to understand what you owe is to pull your credit report from the credit reporting agencies. You have the ability to pull one free credit report per year from each of the three major credit reporting companies. You can obtain the report from the following links: Experian , TransUnion , and Equifax . Take the time to review your credit report. For inactive accounts (zero balances) that are jointly listed, consider closing these accounts to eliminate the risk of creating additional debt that you could be liable for. For accounts that you are listed as the account owner and have your spouse listed as an authorized user, have the spouse removed as an authorized user. You should communicate these actions to your spouse for a number of reasons.

When you are married and you apply for credit together, each of you is agreeing that you are responsible for that debt. While splitting debt in your divorce decree is part of a settlement process, the credit companies are not bound by the divorce decree and still view the debt as jointly owned. For example, if you have 2 credit cards (Visa owed $1,000, MasterCard owed $1,000) that you split during your divorce, you agree to pay off Visa for $1,000 and your spouse agrees to pay off MasterCard for $1,000. Six months after the divorce, you ex-spouse stops paying the MasterCard, you would be liable for the remaining balance. You attorney will probably advise you to have an indemnity clause in your decree if either spouse defaults on joint debt. However, this only gives you the right to go after your ex-spouse for the amount owed (usually through court) which will cost more money. Plus, the indemnity clause is not binding to third parties like the credit card company. It is best to get rid of joint debts prior to the divorce. If you agree to split a jointly owed debt, make sure that the payments are being made in a timely manner or your credit score is going to take a hit. If the payments are not being made, make the payments and keep a record so that you can get these payments back from your ex-spouse through the indemnity clause.

If you have concerns that your former-spouse may be filing for bankruptcy, you will want to structure your property settlement in a lump-sum agreement if possible. Also, if payments are to be made over a period of time, you may want to have those payments classified as child support or alimony. This can help in protecting you from losing the income in the bankruptcy. Additionally, any joint debt should be split into separate debt where feasible. What this means is, if you have joint credit cards, these open joint credit accounts will be listed in the bankruptcy and will have a negative impact on your ability to get credit in the future.

If you have any question regarding this or any other legal matter our firm may be able to help you. Please contact Jupiter Legal Advocates at (561) 748-8000 or email us at [email protected] for further information and assistance. We try our very best to respond immediately.

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