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DIVORCE AND DEBT
Featured below is information regarding paying off individual and joint debts during a divorce. If you are getting married, or already are, it would be a good idea to review the information on this page so that you know what types of accounts are going to be best for you and your spouse and what you can expect if the relationship does not last.

Joint Account:
This type of account will consider your income, financial assets, and credit history, as well as your spouse's. Therefore, you both are going to be responsible for the debt if it goes unpaid. Creditors report both names listed on joint accounts to the credit bureaus.

Advantages/Disadvantages:
An application for any type of loan or credit that lists two people applying may be stronger than if just one person was applying. As previously mentioned, since two people applied for the credit, both are going to be responsible for the debt. Even if a the couple goes through divorce, they are both going to be equally obligated. Former spouses that decide they don't care about their credit and run up bills on joint accounts are going to hurt their ex-partner's credit as well.

Individual Account:
This type of account only considers your income, assets, and credit history. No matter if you are married or single, only you are going to be responsible for paying the debt. This account will only appear on your credit report file. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), it is likely that you and your spouse are going to be responsible for all debts that incur during the marriage. Therefore, the individual debts of one spouse may appear on the credit report of the other.

Advantages/Disadvantages:
It may be difficult for you to exhibit a strong financial picture without your spouse's income if you are not employed, have a low paying job, or work part-time. However, if you do open an account and you are responsible with the account, you will develop a good credit rating. There are things you can do to help improve credit ratings.

  ---Account "Users" of an Individual Accounts
If you open an individual account and your spouse is an account 'user', the creditor must report that your spouse's information to the bureaus. It is likely that the credit history of an authorized user will also be reported.

Advantages/Disadvantages:
User accounts are convenient for those that would normally be able to qualify for credit, i.e. students, domestic engineers. It is important to note that although they are using the account, they are not contractually responsible for paying the debt.

If You Divorce
It is crucial that you pay close attention to the status of all of your accounts, individual and joint when going through divorce. Make sure that payments continue to be made to all accounts. Don't assume a joint account is being paid by your spouse. Make sure it is being paid. As long as there's an outstanding balance on a joint account, both names on the account are going to be responsible.

If you divorce, it would probably be a wise decision to close joint accounts and take your spouse off any account where they are an authorized user. You can also ask your creditors to covert joint accounts to individual ones.


 

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