I am sure that at some point in the past you saw your life (and marriage) as going perfectly, just the way that you had planned it. However, there are circumstances when that perfect life cannot hold up and you may now feel that your marriage was not as strong as you might have thought. That is not to say that you haven’t done everything that you could to try and save your marriage. And yet, you find that a divorce may be the only way that both of you can move on with your lives. If you are now planning for a divorce, or already in the middle of one, one of the most important things to strive for before it is all over, is a clean break from the financial life that you once shared. If there re debts and/or assets still to be settled after the divorce is final, you will find it harder to get any cooperation from the newly appointed ex-wife. This is especially the case if you happen to be the more financially responsible of the two.
One of the toughest scenarios to deal with is when your now ex-wife accumulated large amounts of credit card debt. Once the marriage is over and the divorce is behind you, don’t be surprised if you find yourself in the sights of those credit card companies or the collection agencies they use to harrass people into handing over money. The problem is that in a marriage many companies will assume that both you and your now ex-wife are equally responsible for paying on the debt. Unfortunately, this is a situation that is not explained very well by the courts and divorce agreements often do not properly address the issue. As you can probably imagine, the solutions are even harder to come by when you may have inadvertently assumed responsibility for the debt through a joint account.
When you agree to open a joint account, specifically with a credit card company, you could very well have given them the go ahead to come after you when it is time to collect on the debt. Many creditors see joint accounts as an obligation for both of you, even if you can show explicably that you did not use the account and the agreement with your now ex-wife states that she has assumed responsibility. These companies are not concerned with who actually pays, just that they receive the money (and now large amounts of fees and interest) that they now say is due in full. Do not expect them to go away and leave you alone simply because you show them a divorce settlement that says she is responsible.
Often there is the incorrect notion that if you close out a joint account before the divorce is finalized, then some of these credit card problems will go away. While it may be necessary to keep you soon-to-be ex-wife from running up the bill (i.e. for legal expenses owed to her divorce attorney), closing out the joint accounts does not make any of the actual debt go away. But waiting until after the divorce process is over will make it much more difficult to get your now ex-wife to agree on what debts she is actually responsible for. Hence, you will not only want to discuss the debts in detail during any divorce negotiations, but you will want to do whatever you can to clear out these debts (at least get them completely out of your name) before agreeing an any divorce decree. There are at least 2 options to think about when trying to get this done…
This first option may seem like a daunting task at first, but it is the most certain way to make sure that all debts are settled properly before the divorce is final. Hopefully, in the duration of your marriage, you and your wife were able to build up some assets while incurring the debts in question. If this is the case, then do whatever is necessary to sell off these assets (property, stocks, etc.) in order to turn around and pay off all these debts. In today’s economy, you may not be able to get top dollar for all your joint assets, but as long as you are able to pull in enough to be free and clear of all debts, it will be more than worth it in the end. There is nothing like coming out of a divorce with a clean slate. It makes that whole process of starting over that much easier to deal with.
A second option would be to have both you and your wife open one or more credit card accounts in your own names. Then sometime during the settlement phase of the divorce come to an agreement with her (or her attorney) on what is a fair division of the credit card debt. Before you agree to finalize the divorce make sure that the agreed amount of the credit card balances are transferred into your individual accounts. After this is completed, the balances of the joint accounts should be down to zero, at which time it is safe to close them out. Ultimately you will feel safe knowing that you will only be responsible for the balances that were agreed upon in the divorce settlement.
There may be circumstances where you and/or your soon-to-be ex-wife do not have good enough credit or enough income to open new credit card accounts in your own names. This does not mean that you have to go ahead with the divorce without properly distributing the debt. If your wife is the one who is unable to open a new account, remain adamant of how important this step is to you and that she needs to find a relative or friend who is able to help her open an account by being a “co-signer”. Do NOT agree to wait until she can improve her credit standing before resolving the issues with credit card debt. There is no guarantee that this will ever happen and in the mean time you could be left with the responsibility of making sure that all accounts remain current. Something that could become a huge expense as time goes by.
An alternative to opening an individual credit card account would be to obtain an loan that could be used to consolidate all the outstanding debt that you agree to cover in the divorce settlement. This would actually be the preferred method. But unfortunately, you would typically need an excellent credit rating in order to obtain an unsecured loan that is large enough to cover most of today’s average debts. This would be another scenario where a co-signer could be a big help, but it would have to be someone who has a lot of trust in the idea that you will be able to pay the loan off without affecting their credit with missed or late payments. If you are able to pull this off, consider yourself lucky as many will find it to be much more difficult than they had originally expected. And as always, make sure your soon-to-be ex-wife fulfills her part of the agreement before signing off on the divorce.
Although there are many different avenues for obtaining new credit card accounts or loans needed for consolidating your portion of the debts, the following sites offer opportunities that either I have taken advantage of personally or have known someone who has had a good experience with…
- Creditreport.com – Can be used to obtain your current credit score and report, but also offers a cheap monitoring service that will notify you as soon as there are any changes to your credit (i.e. Your soon-to-be Ex takes opens a credit card account in your name). They offer a free trial for anyone who isn’t sure about the service.
- 100 Day Loans – Very good at finding the loans you would need with the lowest interest rates available. They go through the terms offered by up to 122 different loan providers, which increases the chances that you will get the loan at rates that you will be happy with. These types of loans also work well for paying your divorce attorney’s retainer.
If anyone else has a good idea for how to split up marital debts in a way that it can’t come back to bite someone after the divorce is final, I ask that you please share it with us via the comment section below. Remember, this site only gets stronger through the different contributions offered by its visitors.