I recently worked with Sandra, who had split with her ex several years ago. Her ex-husband agreed to pay off the couple’s $60,000 in credit-card debt. They made the agreement part of their official divorce decree. That, Sandra thought, was that.
Unfortunately, it wasn’t.
Creditors hounded her because her ex missed payments. In addition, all the late payments trashed her credit. She was not able to even qualify for a credit card. Sandra’s ex was the primary credit card holder and she was only a secondary user on the credit account.
Marriage, like diamonds, is supposed to be forever, so Sandra never thought to ask if she would get credit for all of the on-time payments she made when the two were married.
Sadly, her financial advisor forgot to mention that establishing your own credit — in your own name — is crucial; in the event of a divorce, a spouse's debt can follow you if your entire credit report is based on joint credit cards and bank accounts. Then Sandra called me.
Sandra and I worked together for years, and she finally established her own bank accounts and credit cards. It was a long process, but well worth it for both Sandra’s financial wellbeing and overall peace of mind.
Here are a few highlights of our work together. If you discover that your ex’s bad financial habits are threatening your own credit, I recommend you take the same steps yourself:
1. Contact the creditor. We called the creditor and asked them to make a note in Sandra’s file that she split with her spouse. Next, we explained how Sandra wanted the account to be handled.
2. Follow up. After our telephone conversation, we followed up with a letter recapping the conversation and our instructions. We asked them to send us written confirmation that they took the action we requested.
3. Meanwhile, make sure the bills are getting paid. This is key. Divorce negotiations can take months, and all it takes is one late payment to hurt your credit. Sandra began making minimum payments on accounts that were her spouse’s responsibility, and spoke with her lawyer to get compensation.
4. Request Documentation. Once her spouse was making the on-time payments, we asked the lender to send the loan statements and payment coupons to Sandra to further protect her credit. That way, she could see if her ex was falling behind and perhaps step in before her credit ratings suffered.
5. Close the Account. We also checked into having her ex close the credit card and rollover the balance to a new credit card in his name only. Sadly, this was not possible as his credit history was spotted and he did not qualify for an unsecured credit card.
How to Protect Your Assets — a video interview with attorney and accountant, Deborah Speyer.
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