9/18/2013 5:45 PM ET|
When divorce ruins your credit
It may be difficult, but you need to think about your finances when your marriage ends. Protect yourself from more unexpected surprises.
Over the years we’ve received an incredible amount of email from people who have gone through a divorce. Their story is almost always very similar. They’ve all had their credit destroyed because of their divorce and they didn’t see it coming. Here is an example of one of the divorce-related emails:
Subject Line: Credit Disaster
I was divorced a few years ago. I was raising our children, so I wasn’t working outside of the home full time. As part of the divorce settlement, my ex-husband has the home and was supposed to have refinanced it within 90 days of the divorce. He was supposed to refinance it into his name so that it would get my name off of the mortgage loan.
He did not do what he was asked to do and the home went into foreclosure a few months later. I didn’t realize it at the time, but the late payments and eventually the foreclosure were being reported on my credit reports, all three of them. Up until then, I had great credit and great credit scores. Now I have horrible credit and horrible credit scores.
My credit is ruined. When I called the mortgage company and explained that the court ordered that he pay the mortgage and refinance it, they told me that they don’t recognize the court’s order. How can that be true? I thought the court was the boss.
I finally found a job earlier this year but my bad credit almost prevented me from getting it. I guess my employer can also look at my credit reports?
How could I have prevented this from happening?
We’ve gotten emails from women who have had the same story with credit cards, auto loans, and home equity accounts. They all assumed that because the court ordered their ex-husbands to pay the accounts that they were in the clear. Unfortunately, they all found out the hard way that what the courts say doesn’t really count for much.
Here’s the deal: The divorce decrees do not supersede the original contracts with your lenders. That means that just because the court orders one of you to pay a loan obligation, it doesn’t release the other spouse from liability on the account if it was originally opened as a joint or co-signed account. The lender doesn’t recognize that order as an amendment to the contract that both spouses signed. Both parties are still as equally liable as when the account was opened.
Since both parties are liable, it’s likely that the account is being reported on both individual’s credit reports. And, if the account goes delinquent, regardless of the reason, the delinquencies will be reported on both spouse’s credit reports. This will severely damage the credit reports and credit scores for up to 7 years.
It didn’t need to happen. And, it wasn’t expected. So much time and money is spent preparing for and carrying out the divorce and so little attention is paid to the most lingering effects of a divorce: the damage to credit reports.
Not that it’s much help to the nice people who have sent me emails, but here’s how they could have prevented this from happening, or at least reduced the damage:
- Refinance any joint installment loans into one person’s name. That means car loans and home loans. Essentially one person will be buying the asset from the other. If your finances don’t qualify you to do this then you’ll want to sell the asset and split the proceeds. It’s easier to divide cash than it is to divide a house.
- Close any credit cards that are jointly held. This isn’t a strategy that you’ll want to employ for any other reason other than preparing for a divorce since it could lower your credit scores. Have the credit card issuer re-issue you a card in just your name. That way you’ll have the account should you need it and it will only be in your name.
Do all these things as well in advance as you possibly can since the divorce may get ugly at some point. If and when that happens, it’s very possible you’re not going to get any help from your adversarial soon-to-be-ex-spouse. Get these things done before things deteriorate.
While you go through the process of emotional healing from the divorce, you need to be sure to spend some time healing your credit if it has been damaged. Ignoring the problem won’t make it go away, and you’ll probably need access to credit now that you’re on your own.
More from Credit.com:
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I am a single father of two teenage boys - I get, and got, nothing from their mother in terms of support, nothing from the government - not even any tax breaks. I am hundreds of thousands of dollars in debt after suffering through the abuse and harassment of the family courts for years.
My ex cost me tens of thousands of dollars in litigation in order that she obtain sole custody and residency of our children. Once she had done so, and had received all of the 'financial perks' that the courts award to single mothers as 'primary caregivers', (perks that came out of my pocket of course), she decided that she couldn't look after the children after all and shortly after winning her windfall, phoned me and said the boys and their possessions were waiting in her porch so please come and get them. They have been with me fulltime ever since.
I have spent additional thousands of dollars in expenses making sure that the boys see their mother every weekend, during all holidays, for at least half of each summer, and for any other time either they or she desires. In all the hundreds and hundreds of times the boys have been to visit and/or stay with her she has NEVER picked up or driven the boys or paid for their bus or train fares. Yet when the boys with living with her she made no effort to, and in fact impeded in every way possible, any attempts for me to spend time with them. And if I was fortunate enough to get any time I, again, picked up all the expenses. She absolutely refused to drive the boys to or from my home.
The boys' university education is already looked after because of a Trust Fund that I set up solely and totally with money I earned. She never contributed a cent to the fund but I was not given any kind of "credit" for my contributions during divorce proceedings - in fact she did everything she could to try to wrest control of the fund into the hands of her and her father.
I will never be able to retire - I am in my late fifties now - I will have to work until I drop dead in order to have any chance of paying all of my debts - debts that were mandated by the systemic hatred, harassment, abuse, and discrimination routinely and knowingly inflicted on fathers by the socialist feminazi family court system.
And my ex? She's living in a nice, large condo in downtown Toronto. She doesn't work - she lives off the money the courts stole from me to give to her.
Is it any wonder that the biggest cause of death for divorced fathers is suicide?
The VERY WORST thing from a financial viewpoint for any man is to get married. Over 50% of marriages today end in divorce. Over 75% of divorces are initiated by women. Men can be sure that the feminist controlled court will do everything it can (legal or otherwise) to ensure men will be left financially destitute. Women will be given the children so that outrageous child & spousal support awards can be made, in many instances amounting to more than the father's total income. Women will not have to justify or account for any of the money they receive & spend - fathers will have to report every cent to the courts (assuming they have one cent left over). Splitting of family assets means everything she has or ever had is hers & everything you have or ever had (even from before marriage) is hers. I have done volunteer work with many divorced husbands & dads and I have not yet found a single one who wasn't totally destroyed financially by the Divorce Industry
Yup, when my wife decided I was to 'boring', despite working as a truck driver and bringing home a lot of money, she maxed out the credit card, and left. And left me with the bills...
I love how it's only emails from women who's evil ex-husbands didn't do right by them one last time during the divorce. Well, here's my story that you can start another pile for on the OTHER side of the table....
I went through a divorce and my ex-wife had horrible credit when we were first married. I knew this was going to be a problem that would take years to fix so before we tied the knot, I bought her a car in my name so she would have a ride to work. Once divorced, not only did she did she let the car get repossessed but she also drained our savings account and ran up the only credit card I would let her have (thank god for that small favor) to it's max. She doesn't care about her credit, she's only looking for the next prince charming to come buy her stuff. Unfortunately, that leaves me holding the incredibly expensive bag.
By the way, did I mention we got divorced in the first place because she was cheating on me?
Be more inclined to read an article "When divorce doesn't ruin your credit".
That would be a shocker..
Usually you have to turn the page.An ancient Chinese expression comes to mind."Write in
the sand the bad things done to you.Carve in stone the good things you want to remember".
I was divorced 5 years ago. My ex-wife got the house, a car and we slpit the bills down the middle. She had not worked much of our 15 year marriage, so her earning potentional was much lower then mine. Within 3 months she lost the house, had purchased a new more expensive car and stopped paying any of the bills that carried my name. My cfredit had already bottomed out before I found out about any of the problems. She had changed all the addresses on the the billing statements. I finally found out because a creditor some how got my cell phone number.
This does go both ways and people get hurt on both sides.
Sometimes it's the wife; sometimes it's the husband. My divorce after twenty years of misery was the #2 best choice I ever made, personally and financially. My second marriage was the #1 best choice.
Divorce sucks, but I don't think you can say it's one gender or the other that has it worse. If it's not amicable and fair, then it's the person in the marriage who's the "nice guy" who gets most screwed. After 20+ years of marriage with both of us working full time and me (wife) doing 95% of the child rearing and everyhing else, my ex decided a mid-life crisis would make him feel better about himself, complete with new woman met over the internet. I did not ask for anything except slightly less than statutory child support amount, my own 401(k) (which was about $5,000 less than his), and one-half what was left in checking (since he had already spent our savings on the girlfriend), and one-half what we got after I cleaned, listed and sold the house. His sneaking around and opening credit cards in his own name to hide his activity was to my benefit, since the creditors didn't come after me after the divorce when he didn't pay them. I'm happily remarried and continue to keep the kids on his weekends when he's too busy with whatever girlfriend he happens to be living with to see them. After awhile she'll kick him out and he'll start texting me (again) about how sorry he is and how he wishes he was as happy as I am, then he'll find some other poor woman desperate enough to take him in.
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