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How Does Divorce Affect My Credit Score?

September 11, 2013

Money sign - how does divorce affect credit?Along with the emotional challenges of a divorce, financial challenges often also accompany a divorce proceeding. In relation to the many financial challenges, one question that often comes to the mind of our San Diego clients is:

How does divorce affect my credit?


The fact that you are now divorced won't directly affect your credit, credit scores or credit history. This is because your creditworthiness is not based on your marital status. However, divorce can indirectly affect your credit in a number of ways, and usually not in a good way.

Most couples incur joint financial debts during the marriage. These may include credit card debts, car loans, mortgages, etc. While a divorce decree may order one of the spouses to pay off a given joint debt through a court order or settlement, each joint debt is linked to both spouses unless certain steps are taken to sever the union. Therefore, if the party who is ordered to pay the debt makes late payments or just completely fails to pay, both spouses will end up with red flag on their credit reports and as a result their credit scores will likely plummet.

Luckily, there are ways in which you can deal with joint financial obligations between you and your ex-spouse in an effort to avoid a significant negative impact on your credit.

Credit Cards

It is very common for married couples to have joint credit card accounts. After a divorce, once the credit card debt has been allocated to one spouse or the other, the best way to avoid a negative impact on your credit score it to make sure that your name is removed from the credit card accounts that you are no longer responsible for. If your name is removed from the credit card then the creditor can no longer seek collection from you. Therefore, if your ex-spouse fails to pay the credit card debt, it will only affect his/her credit and not yours.

Car Loans

One way to get either your name or your ex-spouse's name off the car loan is to title the car in the name of the spouse who gets to keep it and then have that spouse refinance the auto loan in his or her name only. Refinancing a vehicle is typically pretty easy and once the refinance is done, the spouse whose name was removed will no longer be responsible for the future loan payments.

Mortgages

If you bought a house while you were married, there is a good chance that both you and your ex-spouse are on the mortgage loan. So even if only one spouse continues to live in the home after a divorce, both spouses are still liable to pay the mortgage. Removing one spouse from the mortgage can be a bit tricky but it is definitely a priority if you don't want your credit to be negatively impacted.


If you are worried about how a divorce may affect your credit score, it may be a good idea to get assistance from an experienced family law attorney to help guide your through the divorce process and insure that you take the necessary steps to avoid a credit nightmare. Nancy J. Bickford is the only attorney representing clients in San Diego, who is a Certified Family Law Specialist (CFLS) and who is actively licensed as a Certified Public Accountant (CPA). Call 858-793-8884 to receive assistance today and take steps to ensure that your credit score is not adversely affected by your divorce.

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www.BickfordLaw.com

Do I Have to Pay My Ex-Spouse's Student Loans?

It is becoming increasingly common for at least one member of a married couple to carry a heavy student loan debt. The price of a college education has soared in recent years. As more people go back to school to obtain college or graduate degrees, or additional training, they have been forced to apply for federal and private loans to cover the costs. Since these loans come with high interest rates, paying them off can become a real burden over time. One recent study found that more students were defaulting on their loans than ever before.

Many clients worry that they will be stuck having to bear the burden of their soon-to-be ex-spouse's student loan debt. The following are some questions that clients typically ask a San Diego divorce attorney.

Since California is a community property state where the division of property is split evenly, will I be responsible for paying off half of my ex-spouse's student loans?

Not necessarily. While it is true that most debts that are incurred during a marriage are subject to equal division between the spouses, a debt incurred for education debt may be an exception. Pursuant to California Family Code section 2641, the spouse who takes out the loans can be the one responsible for paying for them, depending on how long ago the loan was taken out, and other facts.

What if I have already helped pay for part of the loans? Will that money be returned to me?

Spouses often do have a right to reimbursement for "community" funds paid toward one spouse's education. Any income earned during the marriage, by either spouse, is considered part of the community fund. So if one spouse uses his or her earnings to pay for the other spouse's education, his or her income would be viewed as community income that was used as a community contribution to education.. In this case, the community may be entitled to reimbursement if the education enhanced the other spouse's earning capacity. Whether the community is reimbursed, however, depends upon a variety of circumstances, including length of time that has elapsed since the loans were taken out.

Are there circumstances where I would not be repaid for the money I paid for part of my spouse's student loans?

There are two typical circumstances where the spouse might not be reimbursed. One is if 10 years have passed since the degree was awarded. Then the other spouse might successfully argue that you have already benefited from the increase in wealth that resulted from the advanced degree. If you cannot successfully refute that argument, you will not be reimbursed. Some of the other circumstances would be whether you also obtained an advanced degree, education or training during the marriage that your spouse paid for out of his or her community income. The two degrees, would then, in effect, cancel each other out. You will also not be repaid if you and your spouse have an express written agreement to the contrary.

What if I have benefited from my spouse's advanced degree, but never helped pay back the loan? Would I be responsible for repaying it after the divorce?

No. The spouse who took out the debt would still be responsible for paying the debt in the event of a divorce. "Benefit to the community" is only weighed when the non-debtor spouse helped pay off part of the debt during the marriage.

Does it make a difference whether my spouse took out his loans during the marriage or before the marriage?

No, the circumstances remain the same. The debt would still be your spouse's to pay off, whether he or she took out education loans before or during your marriage, although if he or she took out loans before the marriage, and many years elapsed before your divorce, you might have trouble proving that you deserved reimbursement because your spouse would argue that the "community" had already benefited.

If you live in California and are considering a divorce, contact an experienced San Diego divorce attorney and learn the facts about student loan debt, other debts, and division of property laws.

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