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Credit issues with divorce

A divorce decree doesn’t change the contracts you made together as spouses to pay your bills. When you divorce, each of you remains liable for your debts.

By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on you new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.

If your spouse agrees to pay off a joint debt, make sure this agreement gets included in the written divorce settlement. If your ex-spouse is ordered by the court to pay a debt but doesn’t pay it, the creditor may force you to pay it. If that happens, you can ask the court to order your ex-spouse to pay you back. The court can also find your ex-spouse in contempt for violating the court’s order.

You can prevent credit obligations from making divorce even more difficult and re-establish your own distinct credit lines after divorce occurs. Consider the following:

  • Get credit reports of both you and your spouse when starting the divorce process to verify the extent of credit obligations. (Information on obtaining credit reports is available at AnnualCreditReport.com or by calling 1-877-322-8228.)
  • During divorce negotiations, keep your joint bills current, even if it means paying for your spouse.
  • Be sure there is a detailed accounting of all account numbers, debt amounts, and the person responsible for credit card and debt in the divorce decree.
  • Don’t leave the marriage with open credit lines. If you both applied for that line, each of you remains liable, even for debts contracted after you divorce. To stop any liability for future debts, close accounts. To close an account, call the bank, follow up with a letter and keep a copy of the letter. When you cancel a card, the lender can hold you liable for any debt on it already.

Upon your divorce settlement, you and your ex-spouse might consider obtaining individual consolidation loans to cover your share of the joint bills. Pay off the joint bills with your individual loans and close all joint accounts. This helps ensure you’ll be responsible only for those bills you agreed to pay. It also will help you establish or reestablish credit in your own name.

Get copies of your credit reports from the reporting agencies after your divorce. Get all three reports through AnnualCreditReport.com or by calling 1-877-322-8228. For more help on divorce and credit issues, consult with your attorney.

Rosemary K. Heins, Extension educator in family resource management, 2013

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