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Divorce and Credit

If you are contemplating separation or divorce, it is wise to contact your creditors in writing to ask that they close your joint accounts (or accounts where your spouse is an authorized user). That is because you will remain responsible for charges on a joint account that are incurred solely by your spouse even if the charges were incurred after the divorce. The creditor does not have to change a joint account to an individual account, and may ask you to reapply for a credit account as an individual and then, on the basis of your application, extend or deny you credit.

Jill and Bob were recently divorced. Before the divorce both spouses signed a loan to buy a boat. The court decree (divorce agreement) stated Bob would pay the balance on the boat loan. For whatever reason, Bob did not pay on the account and the creditor began contacting Jill for payment. Jill told the creditor that the court had ordered her ex-spouse to pay the debt, and she insisted they contact Bob.

The creditor told Jill that the loan agreement they entered into with the couple obligated both Jill and Bob to repay. They also told Jill that they were not a party to the divorce agreement, and therefore do not have to attempt to collect only from Bob and that she was still legally obligated to repay the debt.

The creditors’ statement is accurate.

The loan agreement is a contract that binds all parties that sign it, and that fact does not change because of what is agreed to in a divorce decree. Either party can be contacted for repayment, and both parties’ credit histories can be affected by the debt. Either or both parties may be sued for repayment of the debt, and either or both parties’ wages may be garnished after a judgment is obtained.

If one spouse ignores a court decree to pay a certain debt, the other spouse may wish to inform the court that the court order is being ignored.

Now let’s assume only Bob signed the boat loan and the divorce settlement stated Bob is responsible to pay that loan. Because Wisconsin is a marital property state Jill is still responsible for the boat loan but now only to the extent of her marital assets. Because the boat loan was taken out during the marriage it is considered a marital debt and therefore can be paid with marital assets. Marital assets are assets that are acquired during the marriage. Therefore, a creditor attempting to collect from Jill could not garnish her wages earned after the divorce because that money is not a marital asset. At the time of the divorce the spouses would have split up their assets. If Jill’s share of those assets included some money that she deposited into her individual savings account, those assets could be garnished because those assets are marital assets.

Common Questions

Can my credit history before marriage be reported on my spouse’s credit history?

No. Only obligations that arose during you and your spouse’s marriage can be reported on both credit histories.

Can a debt that the court ordered my ex-spouse to pay be reported on my credit history?

Yes, if the debt was incurred during the marriage.