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Divorce and Credit

By Emily Kelley, Esq.

Anyone who has seen a television commercial lately is used to hearing about how important it is to stay on top of his or her credit. But what happens when a couple, who has built up their credit together, decides to divorce? What happens to two people's credit when they have joint credit cards, both names on a home loan, joint auto payments, joint assets, and joint debts and they decide that they no longer want to be joined with their spouse?

When couples divorce, a Colorado court will carefully analyze finances and divide the assets and debts in equity. "In equity" does not necessarily mean a 50/50 split of the couple's finances. Rather, the court looks to see what is fair given all the circumstances of the marriage, including assets, debts, home consideration, cars, etc., and split the finances accordingly.

When it comes time to separate the finances, credit.com and most divorce attorneys suggest taking certain steps. [1] Both parties need to contact their banks and other financial institutions and separate all of the couple's shared accounts, whether it is for credit cards, savings and checking accounts, investment funds, etc. This may mean closing shared accounts and opening an entirely new account in the newly single's party's sole name. While time consuming, this step is important in terms of protecting one's own credit. If one party unilaterally racks up a large debt and doesn't pay, both party's are on the hook for the debt and both party's credit will be negatively affected by the black marks, even if one party had nothing to do with incurring the debt. Separating accounts is also important not only for separating finances, but also for establishing credit as an individual instead of a couple.

Joint car and mortgage debts can also be refinanced into one party's name. Because refinancing can be a time consuming process, some soon to be divorcees opt to set up a new account with direct payments coming out of that account to pay off such debts to avoid any such missed payment problems. While it may sting given the volatile nature of divorces, it is better to cover the debts while both parties are on the hook rather than deal with the negative credit implications for years down the line because of missed payments.

The financial aspects of divorce can be complicated. Got questions? Call the experienced attorneys at Feldmann Nagel, LLC a call for all your domestic matter needs.

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