In the midst of your divorce, you've probably discussed separating your assets, but you might be less inclined to talk about who's going to take responsibility for shared debts.
Most courts will divide up responsibilities for these during a divorce decree, giving one individual the ownership of each debt.
However, "the decree does not change the contractual relationship that you or your spouse may have with the creditor because the creditor is not a party to your divorce," John C. Heath, credit expert and attorney for Lexington Law, a Credit.com partner, said.
That means that while only one of you may now be legally responsible for paying the debt, the other person's name is still attached to it unless you let the creditor know to remove it. This could be why you're still seeing your former spouse on your credit report.
How Shared Accounts Get Separated
Rules on how to divide joint accounts vary by state, but most places consider debts acquired during the marriage as shared property. It may be a sore subject, but it's important to make dividing up your debts a priority.
Contact your financial institutions and close or separate all shared accounts, including credit cards, home loans and mortgages.
If you don't, you and your former spouse will continue to be tied together financially. And if an ex-spouse runs up credit card balances and fails to pay or falls behind on a mortgage that still has your name on it, the negative marks will show up on both of your credit reports.
After closing out all joint credit cards, you can ask each financial institution to re-issue you a card in your name only. You can also refinance joint installment loans such as auto and home loans.
"Be diligent in refinancing debt or selling an asset that has debt against it, and in making certain that any assets get retitled," Rebecca Zung, Esq. Marital and Family Law attorney in Naples, Florida, said.
It could be better to make these decisions between the two of you instead of letting a third party determine your financial future.
"You can agree to divide debts and account responsibilities and then take appropriate steps to remove the non-obligated spouse from divided joint accounts," Heath said. "You are a better decision maker than a judge who may glance at your case prior to making a decision about your financial future."
If you have shared credit card debts, you can use a free tool like Credit.com's Payoff Calculator to figure out a plan to pay off your debts.
One of the most common things that impacts credit scores after a divorce is when the person responsible for settling a joint debt doesn't pay up, Heath said.
"If this failure to pay is on a joint account, it will affect both parties, including the innocent party's credit reports," Heath said in an email. "Even though the innocent party is not responsible for the debt, it is still reported as delinquent on their credit report."
If your ex isn't paying the debt, and it's messing up your credit, you can dispute the delinquency with the credit bureaus, Heath said. (You can go here to learn more how.)
Also, "you can ask the court to compel or find your ex in contempt for failure to pay," he said. "You could also ask for your attorney fees and costs to do this."
Monitoring Your Credit
As you update your accounts, it's a good idea to make sure the changes take.
"Check your credit a few months after the divorce to be sure it is accurate," Rebecca Zung said.
Too see where your credit currently stands, you can view your free credit report summary on Credit.com. This report is updated each month, so you can see how changes are affecting you as time goes on after your separation and if there are any other steps toward improvement that you need to make. You can generally improve your credit in the long-term by making all loan payments on time, keeping debt levels low and limiting new credit inquiries as your score rebounds.
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