Divorce and Credit: The Impact of Divorce on Your Financial Security
Divorce can be a complicated process, especially when it comes to sorting out financial investments such as credit cards and joint bank accounts. At Rombro & Associates in Manhattan Beach, CA, we will work diligently to protect your investments and build a strong case for your litigation. Divorce and credit card debt can have long-term effects on your financial stability, so you need an experienced attorney on your side. We understand these potential damaging effects and will work hard to help you avoid these pitfalls. Contact our office to learn more about how we can help you through this difficult and complex process.
Effects of Divorce on Your Credit Scores
If at all possible, it is best to pay off any joint debt and close any joint accounts. This can help prevent your credit score from taking a nosedive. Just as with assets, such as savings accounts, debts are considered “community property” and will be divided between both parties. Although this could mean one party is responsible for a particular debt, your name will likely remain on the account. As a result, if your ex-spouse begins defaulting on payments, both of your credit scores will suffer.
Divorce and credit card debt can have long-term effects on your financial stability, so you need an experienced attorney on your side.
Additionally, it may be wise to close any separate credit card accounts you may have, or ensure your ex-spouse does not have access to any of your information. If your ex-spouse still has the credit card information, he or she could quickly rack up large charges with that card, leaving you struggling to pay the debt.
Individual vs. Joint Credit Accounts
There are two types of credit accounts, whether you are applying for credit cards or a mortgage: individual and joint.
An individual account is based solely on your income, credit score, and assets, regardless of your marital status. This type of account appears on your credit report, and if you name your spouse as an authorized user, it will appear on his or her report as well. Since California is a community property state, it is possible that both spouses will be held responsible for paying this debt, even though it is an individual account.
For a joint account, creditors look at the income, assets, and credit histories of both spouses. Joint accounts are reported to the credit bureaus in both spouses’ names, and both parties are responsible for paying off the debt.
Even if your divorce decree assigns a joint account to either party, both must ensure the debt is paid off. If your ex-spouse fails to make payments on a joint credit card, not only will it affect both your credit scores, but you become responsible for making the payments he or she missed.
Repayment Options for Your Credit Card Debt
There are a few different repayment options for credit card debt. Your unique situation and amount of debt will dictate which option is right for you. You may wish to consider one of the following options to settle both individual and joint accounts:
- Creating a repayment plan
- Taking out a home equity line of credit or a consolidation loan
- Going through consumer credit counseling
- Settle your debts through a company that will negotiate with creditors to reduce overall debt
- Declaring bankruptcy
Rombro & Associates Can Help You Protect Your Interests
If you are considering divorce, you need to also consider the impact it will have on your financial security. Contact Rombro & Associates online to schedule a consultation to discuss your situation in detail with an attorney. You can also call our office at (310) 545-1900 to speak to one of our team members.
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