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ELIMINATING SHARED DEBT
Preventing joint credit debt is going to be easier than improving credit as a result of credit that is shared with your spouse. We have detailed a story below that helps describe the effects of having joint credit and what you can do to eliminate and/or prevent it.

Starting a new life/relationship after a divorce
Annette, a 22 year old full time student at Harvard, married Jordan, a 29 year old lawyer. The day they got married, her credit score declined significantly.

You see, Jordan had been previously married. His ex-wife had delinquent accounts before they were even married. She continued her bad credit practices during the duration of the marriage and after the divorce.

Unfortunately, Jordan incurred his first wife's debt as soon as they got married and passed it on to Annette when they tied the knot. How? When couples get married, assets as well as debts become 'joint'. A divorce does not eliminate the financial obligations one has; even if a judge makes a ruling indicating who is responsible for what bills. Creditors and credit reporting agencies don't care about court rulings. If the debt does not get paid, all of the names associated with the debt are going to be affected. 

The above scenario is only the beginning of more bad credit problems as a result of joint debt
While in college, Annette had accumulated tens of thousands of dollars in student loans. Once she married Jordan, she decided that she was going to drop out of school. This decision initiated her student loan repayment period. Even though Annette and Jordan both have full time jobs, paying this new debt is making it difficult to pay all of the bills.

Jordan's divorce ruling allowed him to keep the family car. However, the vehicle was purchased with a car loan and still had plenty of payment left. Also, his ex was awarded all of the furniture. So, when Jordan and Annette decided to start a life together, they needed to buy new home furnishings. They also ended incurring more debt as a result of paying for their wedding and honeymoon. Both of their credit scores continued to decline.

Coming up with a plan...be smart!
A plan was formulated. They would take all of their credit card debt and transfer to a new credit card that offers 0% interest on balance transfers for the first six months. Unfortunately, as a result of their poor credit and high debt-to-income, they were declined by the credit card company.

Jordan tried reduce some debt by refinancing the auto loan. He was successful. However, because of his bad credit, he had to extend the loan term three more years. He was able to lower the interest rate slightly and get some auto equity. Jordan and Annette used the equity to catch up on some of the bills.

Over the next several months, the couple continued to make regular payments to their credit card bills. Not only did they diminish their overall debt-to-income, they improved their credit score. It was a good time to re-apply for a credit card offering 0% interest introductory rate for the balance transfers. They got approved!

**Learn more about plans for getting rid of credit card debt.

After four months, Jordan received a letter from the credit card company indicating that the 0% intro rate has been terminated. This was as a result of being a few days late on their auto loan payment. The auto lender reported the late payment to the credit reporting agencies. The introductory terms for all credit cards require that cardholders make their payments for all of the debt commitments on time every month. If they don't, the intro rate is terminated. It is also likely that the regular interest rate associated with the card will be higher as a result of the late payment. Learn more about default credit card rates.

What should have been done before the marriage?
Jordan and Annette should have both ordered copies of their credit reports. This would have allowed them to see all of their debts and what their credit scores were. It would have also allowed them to ensure that the information was accurate and up-to-date. Any errors would need to be disputed and removed as soon as possible!

Before divorcing his first wife, Jordan should have made sure that all of her debts were getting paid, on time! Although the only way he could have been 100% certain this was getting done was to make the payments himself, he would at least have peace of mind that it was getting done. He should have also made sure that all joint accounts he had with his ex were closed to prevent any additional charges getting racked up.

Annette should not have stopped going to school; not only to further her career development, but to delay her student loan repayment obligations.

Some other things they could have done while starting their lives together was to buy used furniture with cash, instead of charging everything. Spending less on their wedding and honeymoon should have also been considered.

In conclusion....
Marriage and joint debts can indeed put 'more glue in the pot'; making it difficult to move on after divorce. Using the information in this article will help you understand what you can do to avoid becoming a victim of the issues associated with having shared debts.

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