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It is amazing at the trauma that results when married couples don’t communicate about their finances. It seems that with most couples, one is a spender and the other is a saver. One spouse controls the finances, the other spouse has no clue as to what their financial situation really is. It’s no wonder that finances are one of the top three reasons for marital problems and divorces. If it doesn’t cause divorce, it will cause stress, anxiety, arguments, and communication problems. Secrets in the marriage regarding finances always manage to come out. My friend Tina’s husband was murdered. They had their own business. When things had settled down, she discovered that he had several bank accounts and credit cards that she was not aware of. Every day was a new discovery. Tina had to take the business over and try to run it, not knowing what accounts were outstanding. Had her husband shared with her their financial situation, whereabouts of his bank accounts, what debts ho. had incurred, and other pertinent financial information prior to his death, Tina would have had an easier time making things run smoother. With divorces at a record high, most couples don’t discuss openly what their financial situation is and who is to take responsibility for paying the bills after the divorce is final. Without properly notifying the creditors of the divorce and canceling open joint credit cards, both spouses are liable for the debts. Creditors must be notified and must authorize any agreement drawn to release and remove the spouse who will not be responsible for the payment. Problems with credit cards after divorce can come back to haunt you if you don’t take the proper steps to release yourself from the liability. JAN’S STORY Jan and Tom were married exactly one year to the day when Tom suddenly became ill and died. Jan was devastated. Tom was 42 years old and Jan was 36 years old when they were married. This was the first marriage for both. Tom had a small life insurance policy, but not enough for Jan to live on after the burial. Prior to the marriage, Tom had $36,000 in credit card debt. Jan had $5,000 of credit card debt going into the marriage. After Tom’s death, Jan notified all of Tom’s creditors of his death. The creditors told Jan that she was responsible for the debts and they must be paid. Many of the creditors began calling and writing letters to Jan demanding payment. It wasn’t enough that Jan was grieving the loss of her husband, but now she had to contend with creditors seeking payment for bills she never incurred. When Jan told me her situation, I advised her to see an attorney. After counsel, she was told that she only owed money on whatever debts she and Tom incurred after they were married. The debts prior to their marriage were not hers. Letters were sent by the attorney to all of Tom’s creditors, who stopped contacting her. The problem with many creditors and collection agencies is that they will try to bully innocent people who don’t know their rights into paying bills they don’t owe. This is done to get their accounts off their books. The wise thing to do after the death of a spouse is to contact an attorney and find out what your rights are. This will give you wisdom when trying to handle situations such as Jan’s. MARTIN AND LINDA’S STORY Linda frantically called our office. She asked us if we could help her get a consolidation loan without her husband’s knowledge. As she was talking to me, she stopped suddenly and said, “I’ll call you back, Martin just got home and I have to think of a way to tell him I have ruined his credit.” As she hung the telephone up I could only imagine the scene that was to take place. Martin called me the next day to say his wife had told him she had secretly run up $25,000 in credit card debt. He thought that she had been making the monthly payments, only to find out she had not. The bill collectors were calling and his credit was ruined. The house was in Martin’s name, so I suggested that we try to get a new second trust deed on his home to pay back the bills. I told him to contact all the creditors and explain his situation, to ask if they would discount the amount he owed if he paid them off. Almost all the creditors agreed. I helped Martin to get a new second trust deed loan using the equity in his home. All the bills were then paid off. During the time that Martin and I were trying to get his loan and he was negotiating with his creditors to discount the balances, Linda had called me. She told me that she was frustrated with her marriage, and angry with Martin. She felt the only way to get back at him was to run up the credit card balances and then try to ruin his credit. Her plan got out of hand, because she didn’t realize the backlash from the harassment from the creditors The day she confessed to Martin what she had done was a turning point in their marriage Martin realized that he had not taken the time to communicate with Linda about their finances and that it was important for both of them to be involved Instead of ruining their marriage, the confession strengthened it with regard to communicating on issues that had been swept under the table. I wouldn’t recommend this extreme situation to solve a marital problem because it could turn out the other way Open communication and awareness of your finances is a must for a marriage to survive any financial situation RUINED CREDIT AFTER DIVORCE Q. I recently divorced. My husband has ruined my credit. I’m scared to see what my credit report says about me. What can I do? First, don’t panic! Not seeing your credit report prevents you from deleting any inaccuracies that are being reported. Many times a wife will have less information on her report than the husband because she was not the originator of the line of credit, or the line of credit is only in the husband’s name. Your report may not be as bad as you think. Request credit reports from all three credit reporting bureaus. Review each report and dispute with the credit reporting agency any incorrect, inaccurate, or erroneous information that appeals on it. The credit reporting agency must investigate your dispute with the creditor and remove any items that are not correct or verifiable by the creditor. If there is debt information on your credit report that is your husband’s responsibility to pay, contact the credit reporting agency and direct them to notify the creditor. HE AGREED TO MAKE PAYMENTS BUT DIDN’T Q. My divorce decree says my ex-husband was to make the payments on the credit cards that we held jointly. He quit making the payments and now the creditors are coming after me and my credit report is ruined? What can I do? Unfortunately most couples who divorce have the misconception that they are released from any credit obligation for payments if the judge orders either the husband or wife to be solely responsible for making a specific payment. When you apply for credit jointly, you both are responsible for the re payment of the debt. If your husband was ordered to make the payments on the debt owed and he doesn’t, the creditors legally can pursue you for payment. The creditor will continue to report all payment history on both of you as long as the account is open and is held jointly. Contact the creditor and explain your situation. Ask the creditor to re lease you from the liability of this debt and remove your name from the account. Your ex-husband must be in agreement with this and should sup port this agreement with a letter to the creditor. Your ex-husband must state in his letter that he will take full responsibility for the payments. Should the creditor agree to do this, you will no longer be responsible for the account. Your name will be removed from the account. All payment and credit history on that account will stop being reported on your credit report. USE YOUR WIFE’S GOOD CREDIT TO PURCHASE A HOME Q. I was divorced and recently remarried. My credit is in terrible shape but my wife’s is excellent. We want to purchase a home. We both have good paying jobs. Will my bad credit pull her down? Yes! You need to be very careful when you are applying for any new credit, whether it be for a credit card or a mortgage. The way the credit system works is that when you are applying for new credit jointly, your negative credit will not be strong enough to qualify even with your wife’s excellent credit. This is especially true if your income is higher than your wife’s. A credit grantor will look at the wage earner who is making the highest salary to determine an approval or denial. If your income is higher than your wife’s, the credit grantor will evaluate the application on your credit worthiness rather than your wife’s. The best thing to do is to have your wife apply for new credit. Once she has been approved, she can request another credit card for you with your name on it. She can request the card to be a joint or user card. She will be responsible for making the payments. This will help you add new credit to your credit report. If you are applying for a mortgage, wait until the new credit is seasoned for at least a year. I would suggest that your wife apply in her name only. If she is approved for the mortgage, she will be the one solely responsible for the payments. Her name will be the one recorded on the title. After the loan is closed, your wife can file a quit claim deed adding you to the title. It must be recorded with the county recorder’s office. After you have reestablished your credit history you can refinance your home jointly. CHARGES MADE AFTER DIVORCE Q. After my divorce I discovered my ex-wife was still using the charge cards that we had together. Can she do this? Unless you specifically addressed the disbursements of your credit card accounts in your divorce, your wife can still use the credit cards. Obviously this is the wrong thing to do because you are still jointly responsible for making the payments, no matter who made the new purchase. It is important to know which of you is the primary person responsible for the account. You can call the credit card company to find out if you or your wife were the primary applicants. You also can check your credit re ports to see which of the accounts listed reflect the accounts as joint, individual, or a user card. If your accounts were taken out in your wife’s name and you are a user of the account, contact the creditor and request that it removes your name from the account. If the account is a joint ac count, you need to notify the credit card company immediately requesting your name be removed from the account and stating that you have no liability for any activity since the divorce. If you were the primary applicant for the credit card, you can request in writing that the account be closed. This would stop new activity on the account. Your wife should agree to make the payments because they are for her purchases; however if she doesn’t, you still can be held liable for payment because you were the primary applicant. Remember, unless you resolve these problems with your ex-wife and take the appropriate action, the activity will continue to be reported on your credit report. IRS PROBLEMS AFTER MY DIVORCE Q. I was divorced four years ago. The divorce was messy. My husband ruined my credit. Now the Internal Revenue Service is after me to collect taxes they say I owe. I’m terrified! I’m scared to see my credit report. What can I do? Rather than be afraid to see your credit report, you need to face what ever problems you are having and resolve them. Fear is felt when you don’t know what you are facing. By jumping in and facing your fears, you can make a plan and the solutions will then be clearer. First, request a copy of your credit report from all three credit reporting agencies. Check to see if the IRS has filed any tax liens against you. Review any items on your credit report that are not accurate or not yours. Dispute each item on your credit report that is not accurate or is not yours by writing a letter to the credit reporting agencies. If the money the IRS is indicating that you owe was from the years that you were married to your husband and they can’t collect from your ex husband, they will try to collect from you. If you are in financial hardship, you can complete a financial statement showing the hardship. The IRS may allow you to make small payments or if the hardship is great enough they will put you in an uncollectible status. If the money the IRS is trying to collect from you is for taxes owed by your ex-husband after your divorce, I would suggest you see a tax attorney. You are not responsible for taxes from returns after your divorce that were not filed jointly. LACK OF CONTROL Q. My husband and I have separate credit card accounts. He refuses to discuss our finances. 1 discovered that he has overextended his credit and fallen behind in making his payments. Will I be affected by his lack of self-control when it comes to paying his bills? The worse thing to do in a marriage is to keep secrets—especially when it comes to money. It is important for spouses to keep each other informed on all financial matters. Should your spouse die and you were not aware of the condition of your finances prior to your spouse’s death, tremendous pressure and problems could result from this lack of communication. The bills are still due and payable, even with the death of a spouse. You need to know what credit card debts each of you have, what life insurance your spouse has, and the location of the policy. You also need to know of any bank accounts, retirement funds, and stocks, bonds, and other investments. Without this information, you could feel like you are destitute. Many times the person who is the compulsive spender will try to hide credit card purchases and loans. If the spending gets so out of control that debts are too high and can’t be paid, that’s usually when the confession comes. In a community property state, both husband and wife are responsible for repayment of the debts. Credit cards and loans that are in your husband’s name alone will affect only his credit rating. Only if your name is listed on any debts can the credit card companies report the payment his tory on your credit report. Write a plan for repayment that both you and your husband can live with. Consolidating the credit card debt into one credit card may be an option. That would mean transferring balances from one credit card to another lower interest credit card. If you own a home, you could consider taking out a consolidation loan to pay the credit card companies. However you decide to repay his debts, I would suggest that you each limit yourself to one credit card each. Close all other open credit card accounts: This would eliminate the temptation of using them. Pay cash whenever possible and pay the credit card balances off every month. If that isn’t a possibility, pay as much as you cannot just the minimum due. Keeping outstanding balances low will lower the amount you’ll pay in interest. |