Divorce and Credit

Understanding how credit works in the context of a divorce settlement is crucial. For example, creditors, not being parties in the divorce, are not obligated to recognize the orders of a decree. This means that even if your former spouse agrees to pay off the debts of certain credit cards, if he or she fails to do so, the creditors can still hold you legally responsible, depending on the specifications of the account in question.

Individual versus Joint Accounts

The first step in managing your financial obligations in a marriage has to do with the type of account you hold. There are significant advantages and disadvantages to both individual and jointly-held credit accounts:

• Individual Accounts – in this arrangement, you are wholly responsible for any debts incurred, regardless of marital status. California is not a community property state, so individual debts should not appear on the statements of your spouse. It can be difficult to demonstrate a solid financial picture without your spouse’s information if you work from home, part-time, or in a low-paying job. However, with an individual account, no other person can affect your credit strength and history.
• Joint Accounts – with a jointly-held account, both parties are responsible for seeing that debts are taken care of, regardless of who “pays the bills.” Joint accounts can make sense if you are looking to build up credit strength by combining yours with that of your spouse, but in the event of a divorce, he or she can damage your credit history by running up debt, as you are both legally liable.

Account Users

It might sometimes make sense to authorize someone else to use your individual account. Children who are college students, for example, could benefit from this arrangement, as they do not have a credit history of their own. As with joint accounts, it is important to remember that even if other users are listed, you are still liable for the debts incurred.

Contact Us

Financial details such as those surrounding credit can be some of the most difficult parts of a divorce to sort out. Contact San Jose divorce lawyer Daniel Jensen at 408-296-4100 today for more information.