When you decide to go through with a divorce, one of the first things you should do is cancel joint credit accounts and open up separate ones. This prevents you from running into a situation in which one spouse racks up debt for which you may end up bearing some responsibility.
During the divorce process, you will divide responsibility for all assets and debts. The process of debt division can be a bit more complicated than asset division, because a third party gets added—lenders. Lenders aren’t likely to let a spouse get off without responsibility for a debt incurred by both spouses, because that reduces their chances of repayment.
In such a situation, one ex-spouse could be vulnerable if the other makes bad financial decisions. For example:
- If your ex declares bankruptcy, the lender could require you to pay off the full balance of the card and your credit history will take a significant hit, even though you weren’t the one to file for bankruptcy.
- If you keep the joint card open after the divorce, your ex-spouse could run up the balance, and you will still bear partial responsibility.
For this reason, you should make it a point to pay off as much joint debt as possible and close joint credit cards, allowing you to open individual accounts, make your own financial decisions and establish your own credit history.
For more financial advice for divorcing couples (including how to deal with debt and credit), contact a trusted Minnesota divorce attorney at Appelhof, Pfeifer & Hart, P.A.
