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What happens debts and credit during divorce?

Divorce involves more than just emotional and personal upheaval. It also involves navigating complex financial matters, including debt. Understanding how debts are divided and how they can impact the credit of each spouse is important for those who are dissolving their marriages.

In a divorce, debts accumulated during marriage generally aren’t solely personal liabilities. They’re considered shared responsibilities. This means they must be divided during the property division process unless a couple can agree to an alternative arrangement.

Division of debts in divorce

Delaware courts divide all marital property in litigated divorces based on the equitable distribution method. This means debts are divided fairly. Factors like each spouse’s financial situation and contribution to the debt are considered.

Yet, whether a judge orders a specific distribution or spouses agree to the terms of their property division scenario, a divorce decree assigning debt to one spouse doesn’t absolve the other from responsibility in the eyes of creditors. If you’re divorcing and your name is on a joint account or you co-signed a loan, creditors can still seek payment from you until you and your spouse make efforts to remove your name from that loan.

Impact on credit during divorce

Although divorce won’t directly influence your credit score, associated financial changes can have indirect effects. For instance, your credit score could suffer if your ex-spouse is responsible for a joint account but fails to make payments.

The financial strain of divorce might lead to higher credit card usage or difficulty in keeping up with payments. These factors can negatively affect your credit score as well. Additionally, adjustments to credit utilization can be impactful. A decrease in income post-divorce and unchanged debt levels can increase your credit utilization ratio. This could also lower your credit score.

Protecting your credit

To safeguard your credit during and after a divorce, it’s crucial to stay vigilant. Regular credit report monitoring is vital to ensuring accuracy in account reporting. Timely bill payments, particularly for accounts in your name or joint accounts, are essential. Negotiating with creditors to close or separate joint accounts is also advisable.

Finally, the impact that debt division will have on your future is a critical concern during property division. Seeking legal guidance to help you determine how to proceed can be beneficial in this regard.