By Gerri Elder
When a couple marries; it is not only their lives that are joined when they sign the marriage certificate. What many people don't realize is that at that point, the credit histories of these two people will also inevitably become intertwined. While a divorce may sever the marriage, it does not automatically separate the couple's credit reports.
Divorce can certainly cause financial problems or be caused by financial problems. Either way, when people decided to separate, there are suddenly two households and two separate lives to support on what is usually the exact same income. So if there were problems paying the bills when the couple was together, it certainly becomes more difficult when the money has to stretch much further.
When people have had difficulty paying bills during a marriage, it is easy for them to play the blame game. During a divorce, many people may feel as though they are also divorcing the financial problems that their spouse has caused through laziness or irresponsibility. The fact is that those late payments on joint accounts may haunt the credit reports of both parties long after the divorce is finalized.
During divorce, assets and debts are divided among the parties. Although the accounts may have been opened as joint accounts with both parties sharing legal responsibility for repayment, since the spouses will no longer be sharing finances and the bills still have to be paid, there have to be decisions made about who will pay which debts.
The thing is, that is a husband or wife has been irresponsible about paying bills on time in the past, chances are that is not going to change. Since there will also be less money available to pay bills, the situation may even get worse. This can and will impact the credit reports of both parties if they were both legally responsible for the debt.
Family court judges do not have the ability to re-arrange legal contracts that were entered into by the parties regarding the repayment of debts. During divorce the accounts that are joint accounts remain joint accounts, although there is likely to be an agreement or judgment made about who is responsible for payment under the terms of the divorce. The simple fact is that joint accounts can really wreck the credit histories of both parties during and after a divorce.
When the person who should be paying the debt after the divorce defaults on the loan, the credit company really doesn't care that the divorce agreement says that they were the one responsible for paying. When a company is owed money they look at the legal agreement that was entered into when the money was borrowed. If there are two names there, that means they can and will pursue both parties for payment of the debt, regardless of any divorce judgment and the credit reports of both debtors will be negatively affected.
According to an article written by Tracy Coenen of Wallet Pop, a divorced person may have some limited recourse when their ex defaults on a loan and it ends up on their credit report. By providing proof that the debt was assigned to the ex-husband or ex-wife during the divorce, a person does have legal grounds to have the damaging information removed from their credit report. However, this can be tricky and take quite a while to accomplish, and during the months of waiting for the credit record to be corrected, it can be very difficult to obtain any kind of credit after divorce.