Handling post divorce debt

Q:  I got into about $20,000 in credit card debt due to the fact that my ex-husband only had a job about half the 7 years we were married.  Through the process of our divorce we split the debt between us and I am now almost completely out of credit card debt!  Also because of him I now have a low credit score because some of the accounts that he took over would not take my name off the accounts and he has made several late payments.  He has had creditors after him on those accounts that share my name.  I know that it's not a good idea to close unused credit accounts, but if I no longer have control over them should I have him close them when they are paid off?  Also, as far as raising my credit score, I have heard that keeping a small balance of a couple hundred dollars on a credit card while continuing to use it and pay on it will help raise a credit score...is this true? Thank you!

 

--Felicia, Warren, PA

 

A:  Congratulations for making such great progress on paying down your debt!  It’s not easy and it sounds like you’re making great progress.  What I want you to do is remember how painful the struggle to become debt free has been and don’t let it happen again! 

 

Now to the ex and your current financial issues. A word to the wise: It’s always best  to contact your creditor to let them know what’s going on, otherwise they can’t give you an assist.  It sounds like you’ve already done that. So, if the joint accounts are still open please attempt to close them now to prevent any future charges. Then the balance will change from revolving to amortized debt.  You’re right, it’s usually not a good idea to close accounts because a long payment history is usually a positive when it comes to calculating your score plus you lose that available credit line which could also negatively impact your score.  Since your credit history is already damaged, it may be best to protect yourself from further dings.  But please note that closing your account does not eliminate the bad payment history.  That will lurk on your report for 7 years.  If your ex-husband refuses to comply, then ask about the possibility of freezing the accounts.  In other words, talk with the bank about ensuring that no more charges can be made to the cards.  Another option could be each of you opening a credit card in your name and transferring your part of the balance.  Transfer fees may be owed, but separating yourself sooner rather than later could be a step in the right direction to repairing your credit. 

 

Responsibly using credit is the key to increasing your credit score.  That means continuing to pay your bills on time every time.  Consider signing up for online bill paying services – my philosophy is if it’s convenient to pay the bills, you’re more likely to do it.  Your hard work at cleaning up things since the divorce would indicate that’s your style.  Whether you leave a small balance or better yet, use and pay-off your cards each month you will be rebuilding your credit score over time.  Learn more at www.myfico.com.  Keep up the good work and good luck in this new chapter of your life.

 

 

Comments

[Jennifer]

Hello everyone,

I saw the article about wishing people good luck, and since exam time is coming up and my little brother is totally freaking out, I wanted to add a quick comment. I really enjoy sending my friends ‘Good Luck’ greetings, I think it is such a nice touch as it shows you are thinking of them and hope the very best for them. I started to find that paper greetings were getting more and more expensive which really wasn’t good! So I looked for an alternative, and found a really cool free Good Luck eCard site that I adore. There are so many cards to choose from so I have not become bored, and they always seem to be updating the site which is cool. There are quite a few sites out there, so it might be worth taking a browse around yourself, but I found this site really helpful. Check out http://www.ecards.co.uk

[Paula Langguth Ryan]

Dear Felicia,

Another important thing to remember is that federal law overrides divorce law. Should your ex-husband decide to go bankrupt on the bills he took over, you would then be responsible for their payment. It's a sad but true fact of the credit industry. This is why the creditors want to keep your name attached to the bill. And legally, they can, since they were incurred as a joint account that you opened together or that your name was put on. If you never charged anything on those accounts, you might have some leverage to keep them from transferring the bills to you. If you did charge on that account at any time, or signed your name to the application to be a joint card holder, then your best bet is to send a certified letter to the creditor, informing them that you are not responsible for any debts incurred after the date of your divorce, or separation, and include a copy of your separation or divorce decree that states who is financial responsible for what.

As for carrying a balance on your credit card - this is actually a myth that the credit card companies have created to guarantee that they'll get interest from people. Don't carry a balance, unless it's absolutely necessary for a month or two due to a large ticket item, and make sure that the credit card you have gives you a grace period so that any new charges don't incur interest during the month. Also, make sure that your ex-husband's name is taken off those accounts, so that if he does go bankrupt you're not stuck with a bankruptcy notation on YOUR credit report that you then have to resolve.

Best wishes,
Paula Langguth Ryan
author, Bounce Back From Bankruptcy