Divorce Myths: The court can protect my credit after divorce.
A common myth we come across in our practice is that the court has the power to protect a client’s credit if the ex spouse doesn’t pay an obligation they were ordered to pay under a divorce decree. while everyone’s lives would be easier if the court had this power, they do not. You have to plan to protect yourself and help your lawyer in the process.
Liability for debt, and negative credit reporting for nonpayment of debt comes from contracts, not court orders and judgments. The court cannot alter a contractual relationship between you and a third party. If you and your spouse signed a legally binding contract with a creditor, the divorce decree cannot protect you from the creditor. You both signed a binding contract with the creditor (for example: Citibank, Countrywide, American Express), and that contract survives the divorce decree and remains an obligation of both parties, no matter what the divorce decree says. Worse, just because the judgment says your ex has to pay doesn’t prevent the creditor for suing you for non-payment.
how to protect yourself?
1. At the begriming of your case, you should obtain credit reports from all three credit bureaus, transunion, experian, and equifax. Your credit reports will help you identify what accounts are appearing on your report and may impact you. The easiest way to do this is online. The web addresses and mailing addresses for the three bureaus follow:
Equifax Credit Bureau
P .O. Box 740241
Atlanta GA 30374-0241
P.O. Box 9701
Allen TX 75013
Trans Union, Consumer Disclosure Center
P.O. Box 2000, Chester PA 19022
- 2. You should, if at all possible, make sure that all joint credit cards are closed and paid at the time of divorce.
3. You can’t pay all the debt, you should monitor every month any joint obligation the court ordered your ex to pay. If he or she doesn’t pay it, you should consider paying it yourself and seeking reimbursement through the court.
4. You should make sure your judgment contains an indemnity clause stating that if you are harmed as a result of your ex spouses’ non payment, you have recourse.
5. In negotiating a settlement, you should try to make sure that you are responsible for payment on debts that you have primary contractual liability to repay! There is no benefit to you if the court orders your spouse to pay your debts and then the ex spouse fails to do so.
Some judges are willing to compensate a party post judgment for credit damage resulting from intentional failure to pay debts received by the ex spouse in divorce, however, it involves spending more money on lawyers and going back to court. Post divorce litigation is no substitute for proper planning and protecting yourself in advance.