Credit Repair - Bankruptcy & Divorce
Credit Repair - Divorce
A spouse who divorces and does not have separate credit in his or her own name is in a very vulnerable position. If the joint accounts are kept open, the consumer risks becoming liable for an ex-spouse's debt. If all joint accounts are closed or if the consumer no longer is removed from an authorized user account, the consumer may be left without ready access to credit at a time when credit can be especially valuable. However, if you have your own credit identity separate from a former spouse, access to credit should be generally unaffected by a divorce-except in the case of joint account problems. As was noted in the section on widowhood in Chapter 7, creditors cannot deny a consumer who shared accounts with a former spouse continued use of those accounts, nor can creditors change the terms of credit simply because of a change in marital status. Creditors can, however, require that you reapply for that credit if you would not have qualified for the credit on your own at the time application was first made. In marriages where there is a significant disparity in earnings between spouses and the spouse with the smaller income shared accounts with the other, the person making less money risks losing the credit.
If you reapply for credit once held jointly or apply for completely new credit, potential creditors cannot discount or refuse to consider non-job income such as child support and alimony. However, they do have the right to request that you prove the reliability of these sources of income and can deny a person credit if they judge the income sources to be unreliable. If you will be relying on non-job income to help you qualify for credit, it is a good idea to collect and save any documentation you may have that supports the reliability of that income. Such documentation might include: canceled checks, legal documents such as your divorce agreement, a notarized letter from your ex-spouse, bank deposit slips, etc.
In evaluating your credit-worthiness, creditors also must consider the credit history of a former spouse if you can demonstrate that your former spouse's history reflects your history too. If that credit history is positive and if you have no individual credit and never shared credit with your former spouse, you may want to use this provision to build your own credit record. However, as we indicated in Chapter 7, this is a long shot. For more information visit credit repair ( Reference: http://www.how-to-credit-repair.org ).
To demonstrate that a former spouse's history reflects yours, you may be able to provide copies of checks you wrote to pay on accounts, letters you may have written to creditors regarding accounts, etc. If you are on good terms, you @ may want to ask your former spouse to write a letter to the potential creditor on your behalf.
If you are a woman and take back your maiden name after a divorce, be certain to let your creditors know. Ask them to begin reporting accounting information to credit bureaus in your new name. Then wait a couple of months, and check your credit record again to make sure that your creditors are reporting correctly to credit bureaus.
Bankruptcy after Divorce
In today's economic times, it is not inconceivable for your former spouse to file for bankruptcy. Bankruptcy law may wipe out debt that your former spouse owes you as part of your divorce agreement, but it does not cancel alimony and child support obligations and does not wipe out tax debts. A bankruptcy can make it difficult for your former spouse to make payments, possibly pushing you into bankruptcy too.
Consumers living in community property states face additional problems. In those states, both parties in a marriage are jointly liable for any debts that were incurred during that marriage whether those debts were acquired individually or together. That means that if a former spouse, as part of a divorce agreement, promises to pay off all debt from a marriage and fails to live up to that agreement, creditors have the legal right to expect payment from the other party in the now dissolved marriage.
In such a situation, you have two basic options-pay off the debt and try to save your own credit history, or file for bankruptcy. If you want to pay off the debt, and if those financial obligations are sizable, it is advisable that you try to negotiate a payment schedule with each of your creditors.
To arrange a workable payment plan, contact each creditor directly-by letter, telephone or in person. Tell your creditors what your situation is. Explain that you would like to meet your obligations but your income is such that you will need to work out a schedule you that can afford.
If you do not feel comfortable initiating these negotiations, schedule an appointment with a counselor at the Consumer Credit Counseling (CCC) office nearest you. CCC counselors are professionals, have a lot of experience in creditor negotiations and are well respected by most creditors.
Do not opt for bankruptcy without giving it a lot of serious thought. A bankruptcy will remain on your credit record for up to ten years and will make it even more difficult for you to build a positive credit record. Before you make a decision regarding bankruptcy, talk with a CCC counselor so that you understand all the ramifications of that step, and make sure that all other options for dealing with your problem have been exhausted.
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