Most people don’t enter into marriage prepared for, or even considering, its potential end. But according to the Center for Disease Control, half of all marriages in the U.S. will end in divorce. With odds like that, it’s a good idea for partners to consider the possible financial ramifications. Dealing with formerly shared assets and debt will take cooperation to prevent the destruction of your credit ratings. Creditors don’t care how you divide your property and a court order will not override what you owe; you will both be responsible for all joint accounts. Here are some things you should consider before getting marriage, or filing for divorce:
Before the Wedding
As with all relationship issues, honesty is vital so there are no surprises after taking your vows. No matter how confident you are in your future as man and wife, having a clear understanding of each others current financial statuses will make financial navigation clearer before you even set a wedding date. The debt burdens of one will now possibly be doubled and both partners will need to be on board to come up with solutions.
Collect all credit account information and make separate lists for those that will be an individual’s responsibility and those accounts that will be held jointly. Get copies of your credit reports and look for signs of potential trouble. In this way, you’ll see the big picture of your combined financial condition. Be sure you understand what areas need to be fixed to bring harmony to your financial future together. It’s also important to know whether you will be living in a community property state where property purchased during a marriage is equally owned by both husband and wife. These laws will have an impact on what happens, if, heaven forbid, you get divorced.
Once you’re in agreement about how you will deal with your finances, it’s time to put in place protections that will secure each one’s independent credit history.
The Trouble with Authorized Users
While it may be convenient to share the same credit cards, the liability of the debt falls solely on the individual account holder. If your spouse is listed as an authorized user, he or she may charge to the account without have the worry of paying back the debt. In the case of a marriage that has gone sour, this could leave the account holder carrying a massive amount of credit card debt without the means of paying it off.
Not only should you call the credit card companies to remove your spouse’s name from your credit accounts, but have him or her remove you from theirs. Also, consider the potential damage to your credit score, if your partner defaults on their account or racks up overwhelming debt on your account.
The Safety of Separate Accounts
Joint accounts are the cause of much grief in divorce proceedings. In determining who is responsible for what with joint accounts there is always a winner and a loser. Why not eliminate the stress by agreeing to divide the credit accounts, with each in one partner’s name, while balancing the amount of debt between the two of you? Separate accounts will also protect the spouse who earns less, in case of divorce.
For the benefit of both partners, keep clear, accurate records. Request a copy of your credit reports at least every six months. Check for accuracy and report any errors immediately to the credit reporting agency.
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