Could your credit be sabotaged while your divorce is pending?
Our family law firm focuses on various alternative dispute processes. Methods like mediation or collaborative law can help a divorcing couple save on both time and expense. Indeed, if key terms can be resolved by mutual agreement, a trial may not be necessary.
Instead of a trial, spouses can present their terms to the divorce court in a written settlement agreement. If the court is satisfied of the approximate fairness of the terms, it will approve that agreement by issuing a divorce decree. Partial approval is also a possible outcome, where the court may require only one or two disputed issues to go to trial.
Yet what is the effect of the legal out-of-court settlement agreement? In essence, the divorce decree is court approval of a contract. As with other contacts, parties cannot mutually agree to usurp existing law. Any individuals or entities that are not parties to the decree cannot be bound by it. When it comes to preexisting debt obligations, those creditors are generally not privy to the divorce proceeding. Consequently, their contractual loan arrangements are generally not altered by the divorce decree.
The bottom line is that if a spouse’s name is not completely removed from accounts, he or she might remain liable regardless of agreements finalized in a divorce. Our law firm understands this outcome and can help spouses take steps to protect themselves while their divorce is being finalized. You don’t have to wait until the divorce decree to start taking your name off certain joint accounts, like bank accounts or joint credit cards. A mortgage might be more complicated, possibly involving refinancing, but our attorneys can help advise you through the process.
Source: FindLaw, ” Credit and Divorce,” copyright 2016, Thomson Reuters