When you are considering a separation or divorce from your spouse, or in the event a dissolution of marriage proceeding has begun, it is important to consider whether or not actions can (or need to) be taken to prevent dissipation of assets, or extraordinary debt being incurred, by your spouse, and to consider other actions to protect your interests prior to a final resolution of your case. You should discuss these issues with an experienced family law attorney to determine whether or not you should take special actions to safeguard property and your credit, and if so, the timing and notice (if any) to be given to your spouse of actions taken. In addition to parts 1 and 2 of this series, over the next 5 of these posts, I will discuss several topics you should discuss with your attorney and weigh the risk that your spouse may take action if you do not, against the possibility that action by you may anger your spouse or be viewed in a negative light by the court. Of course, time can be of the essence so do not wait to have this discussion. While you are mulling over what to do, your spouse may be taking action.
In this third part of this series, I will discuss issues to consider regarding what actions that you might take regarding your credit, credit cards and debit cards after discussing these issues with your attorney.
YOUR CREDIT & JOINT CREDIT CARDS, CREDIT LINES, AND DEBIT CARDS
Many clients who come to us are unclear about whether or not their credit and debit cards are joint accounts with their spouse or what to do if they have these types of joint debt accounts. They are also frequently concerned about their credit scores and how they might be negatively impacted by actions of their spouse. It is important to know that the divorce court does not have the power to “clean up” your credit report or improve your credit score or re-write the contract between you the any credit institution. While the court may allocate responsibility for debts between you and your spouse, this is only an order which may be enforced between you and your spouse and will not have any legal impact on the credit institution.
- Debit accounts are joint if you and your spouse have ever signed an application for the loan or credit card, and/or if the bill is addressed to both you and your spouse,. Yyou will most likely be liable on the joint account as long as it is open. The divorce court does not have the power to sever the “contract” you may have made with the credit financial cardinstitution. A debit card is often issued by a financial institution in conjunction with a bank or similar financial account. If the debit card is issued on joint bank account, then either party has the ability to draw funds on the joint bank account using a debit card issued by the financial institution.
- If you believe your spouse will run up the credit card debt or abuse the use of the debit card on a joint bank account, you should discuss with your attorney whether any joint credit card should be closed. Some credit card companiesy will close accounts only if there is a zero balance, and if all cards are returned to them. However, some credit card companies will close the account even if there is an outstanding balance, but you may remain liable, along with your spouse, for the outstanding balances. Some credit cards will not be able to be closed unless the credit card institution receives a request to close the account from both accountholders. Each company has its own rules and procedure. If a decision is made to close a joint credit card account, the request should be made both by phone and in writing with a “return receipt requested.” You should inform the credit card company that you desire to close the account “at the consumer’s request” and that you will not be liable for any charges incurred thereafter by your spouse. You should request a written confirmation of closure from the credit card company.
- It is important to know that closing credit cards can impact your “credit score,” but you must consider the risk of non-closure against the possible impact on your credit score.
- Similarly, if you believe your spouse will run up debts without your consent, you should discuss with your attorney whether you should close or put a “hold” on all joint lines of credit, home equity lines of credit, and overdraft checking by sending a written notice to the creditor.
- Generally, to protect a joint bank account from the misuse of a debit card, you may need to close the joint bank account. It is very important to discuss this with your attorney before doing so in order to prevent possible violation of automatic restraining orders that exist in some courts once a divorce case has been filed.
- You should consider obtaining a credit report on all debts in your name to determine the current status of all debts for which you may be liable and even consider obtaining your credit card score for a relatively modest charge. Under Federal law, each person is entitled to one free credit report per year (not a credit score) from each of the three major credit reporting companies (Experian, Equifax and Trans Union). While the information contained on reports from these companies is usually the same, that is not always the case.
- It is unlawful to obtain a credit report or credit score on your spouse by pretending to be your spouse when seeking this information online or otherwise.
- The free credit reports and credit scores (for a fee) can be obtained from the internet by going to www.annualcreditreport.com.
While closing joint credit cards, freezing or closing joint lines of credit and closing joint bank accounts are actions that may exacerbate tensions with your spouse, they may be recommended by your attorney to prevent further liability to the credit institutions and to prevent dissipation of joint funds or your liablityliability for increased debt incurred by your spouse.
Since aAll of these actions can cause negative responses from your spouse, but may, in the end, have been better than doing nothing at all, but it is important that they should not be tried without the careful planning and advice of your attorney.
Links: Part 1