Credit Damage Control

IMAGINE knowing the right steps you could take in order to safeguard your credit rating when contemplating divorce. It was not too long ago that severe financial problems stemming from divorce had a dramatic effect primarily on women. But these days . . . many men are now confronting these issues because of the ever-increasing numbers of women who are pursuing high paying jobs in the corporate world and operating their own independent businesses.

The latest figures reveal that a high percentage of women are now the major wage earner in the family. This economic turnabout means that in some households it is the wife rather than the traditional role of the husband whose income qualifies a couple for joint credit. Because of this world-wide trend a rising number of women have embraced the opportunity to start and run their own businesses.

Help To Minimise Financial Harm

However, if their businesses fail or become insolvent, it could make financial problems for their former spouse. Unfortunately, no matter how joyful and rewarding your relationship is at present, it is prudent for both men and women to allow for the possibility of divorce and the sliding financial position it often causes both parties. If you are contemplating divorce, it is crucial that you take certain steps before filing to help minimise any potential financial harm the change in marital status may bring, including:

Take care of all mutually shared bills and credit card debts (and joint account obligations) by making sure that they are paid in full. By doing so, you do not risk the possibility of their becoming wholly your debt (to be paid completely by you) after you are divorced.

Making doubly sure that you have excellent credit entirely separate from your spouse. If you do not, hold-up your divorce until you can build sufficient credit and be in procession of a bank account in your own name.

If you already have either joint or individual credit, apply for a copy of your credit record from a Credit Reference Bureau, and attend to any problems you may come across.

If some of the accounts in your credit file are joint accounts with negative remarks, and if the unfavorable information is the direct fault of your soon-to-be-former spouse (and/or the result of other conditions beyond your control) write down the reason for the negative remarks. Next, contact the Credit Reference Bureau to ask that your statement be a permanent record of your credit history. This will aid you in disassociating yourself from the accounts problems. It is also best to attach the same explanation to any credit applications you complete.

If you trust your attorney or have a competent financial adviser you trust, talk with them about what you should do to ready yourself for the change in your marital status. In the event your spouse files for bankruptcy (while you are going through the divorce) it is MOST likely that the divorce proceedings will be stopped until the bankruptcy is completed. You can take advantage of this time to discuss with your attorney (and/or financial adviser) about how to minimise the impact of your spouses troubles on your financial situation.

Creditors do consider spouses with joint accounts to be liable equally for those accounts. In light of this you should cancel all joint accounts as soon as you can. If you do not then you run the risk of being legally responsible for making payments on accounts that your former spouse accrued and is unable to pay. What you should keep in mind is that if your spouse is late in making payments on the joint accounts or defaults on those accounts, negative information will be reflected in your credit record as well as in your spouse's as long as those accounts are open in both names. You may then face having to re-establish your own previous good credit.

Close ALL Joint Accounts Immediately

One of the best things that you can do is to write to each creditor and let them know that "as of the date of your letter" you will NOT be responsible for any charges your spouse might run up. When you are ready to close your joint accounts, keep in mind that your goal is to obtain individual credit with the same creditors. And they have the legal right to ask you to reapply for credit if your joint accounts were based on your spouse's income. However, if your credit accounts were based on your income, or if either of you could have qualified for credit at the time of the original application you will probably not be required to reapply. Stay away from negotiating a divorce agreement that permits your spouse to maintain your joint accounts in exchange for paying off the outstanding balances on those accounts. As long as those joint accounts remain open whether they are used by you or not you will be liable for those accounts despite what your divorce agreement outlines.

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