Archive for the ‘Divorce’ Category
It is true that marriages are made in heaven. But everything falls flat on their butt once a marriage hits the rocks. Every bit of reconciliation fails and divorce seems to be the only way out. If everything – both financial and other aspects – is settled before parting ways, then we can say – all is well that ends well. But if the separation is not so amicable and there is some sourness left somewhere in terms of an unsettled financial debt, things can turn both ugly and complex.
One such difficult situation arises when one of the partners incur a credit card debt, and the credit card debt after divorce assumes the form of a Damocles sword in the form of collection people, constantly nagging either of the ex-spouses to settle the due. The situation is a bit tricky here because whether the person who incurred the debt or the other ex-spouse has the real responsibility of making the payment is still not defined clearly by the law. The situation gets more complex when it comes to joint accounts. But let us see the credit card debt after divorce now.
Credit Card debt after divorce – mostly in joint credit cards – is generally seen by the creditors as the joint responsibility of the couple. Actually the spouse who didn’t incur the amount is not liable to pay, but the credit card company may seek payment from both the parties as they care only about the money due to them. What settlement had been reached after divorce is of little interest to these people.
One may feel that closing out credit card accounts (joint) is a solution to all these problems. If you have a responsible spouse, well this will work. But the fact is that the account does not cancel itself until somebody makes the payment. Also, after divorce, it is legally not practical to divide the debts. Hence these are some practical solution, from best to worst.
- Sell any joint asset (say, home) and pay the debt and close the account. It is a classic example of killing two birds with a stone.
- Separate credit cards can be a better option in such a situation. After applying, get the dues transferred into individual cards, divided according to your own logic or the way you spent.
- In this regard, if one of the spouses is not qualified to get a card, get one of the relatives to cosign the card before transferring the share of balance.
But, rather than being through this ordeal, the best option is to get yourself everything settled before divorce. It is always a pain to go behind all these joint issues when you are about to start a new life. Take Care!
Mary and Bill recently divorced. Their divorce decree stated that Bill would pay the balances on their three joint credit card accounts. Months later, after Bill neglected to pay off these accounts, all three creditors contacted Mary for payment. She referred them to the divorce decree, insisting that she was not responsible for the accounts. The creditors correctly stated that they were not parties to the decree and that Mary was still legally responsible for paying off the couple’s joint accounts. Mary later found out that the late payments appeared on her credit report.
If you’ve recently been through a divorce – or are contemplating one – you may want to look closely at issues involving credit. Understanding the different kinds of credit accounts opened during a marriage may help illuminate the potential benefits – and pitfalls – of each.
There are two types of credit accounts: individual and joint. You can permit authorized persons to use the account with either. When you apply for credit – whether a charge card or a mortgage loan – you’ll be asked to select one type.
Individual or Joint Account
Individual Account: Your income, assets, and credit history are considered by the creditor. Whether you are married or single, you alone are responsible for paying off the debt. The account will appear on your credit report, and may appear on the credit report of any “authorized” user. However, if you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin), you and your spouse may be responsible for debts incurred during the marriage, and the individual debts of one spouse may appear on the credit report of the other.
Advantages/Disadvantages: If you’re not employed outside the home, work part-time, or have a low-paying job, it may be difficult to demonstrate a strong financial picture without your spouse’s income. But if you open an account in your name and are responsible, no one can negatively affect your credit record.
Joint Account: Your income, financial assets, and credit history – and your spouse’s – are considerations for a joint account. No matter who handles the household bills, you and your spouse are responsible for seeing that debts are paid. A creditor who reports the credit history of a joint account to credit bureaus must report it in both names (if the account was opened after June 1, 1977).
Advantages/Disadvantages: An application combining the financial resources of two people may present a stronger case to a creditor who is granting a loan or credit card. But because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don’t pay them can hurt their ex-partner’s credit histories on jointly-held accounts.
Account “Users”
If you open an individual account, you may authorize another person to use it. If you name your spouse as the authorized user, a creditor who reports the credit history to a credit bureau must report it in your spouse’s name as well as in your’s (if the account was opened after June 1, 1977). A creditor also may report the credit history in the name of any other authorized user.
Advantages/Disadvantages: User accounts often are opened for convenience. They benefit people who might not qualify for credit on their own, such as students or homemakers. While these people may use the account, you – not they – are contractually liable for paying the debt.
If You Divorce
If you’re considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it’s important to make regular payments so your credit record won’t suffer. As long as there’s an outstanding balance on a joint account, you and your spouse are responsible for it.
If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorized user. Or ask the creditor to convert these accounts to individual accounts.
By law, a creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit. In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.
In countries which are predominantly Catholic, divorce is not welcomed by the culture which is greatly influenced by religion. For example in the Philippines and Malta, divorce is illegal. Because of the Catholic Church’s influence, a number of countries in Europe like France banned divorce. As a result, people in these locations may seek out other areas in order to get divorced.
Comparing and Contrasting
In countries which have legalized divorce, separating from your spouse may be much simpler than in those where divorce remains illegal. In countries where divorce is illegal and annulment may be the only way of getting out of a problem marriage, matters can get much more complicated.
The process of annulment may take a much longer period of time than the procedure of divorce. Divorce is the termination of a marriage contract. Annulment, on the other hand, deems the marriage null and void, as if one were never married in the first place. This makes couples think twice before considering the final step of annulment. But this can have its pros and cons.
Culture and Divorce
Most of the time, a woman may even stay in an abusive relationship for a long period just because of the culture’s view on separation. This is exactly where countries which have legalized divorce have the upper hand. In these cultures, getting out of any kind of abusive relationship as soon as possible is emphasized greatly. Looking at it this way, divorce becomes a tool for saving those spouses in detrimental marriages. But divorce itself may also be abused.
Marriage is a serious decision for anyone and it should not be taken lightly with the thought that one may just as easily get a divorce.
Debate upon the ease in which a couple may get divorced in some cultures has also long been discussed. The “Las Vegas” ease of tying the knot and just as easily cutting it off has been highly criticized by conservative cultures.
Getting married for a couple of hours just for the feel of it and then getting divorced soon after in just the same hurry is a clear example of how divorce can be abused.
