Credit Repair - Self Help

In my last post I covered the fact that a divorce decree does not relieve either party from joint debt. The idea of divorce is to sever emotional ties and financial ties. If you are not careful, or you have a vindictive ex-spouse you once clean credit report can become a hindrance for years to come. Carrying joint debts into a divorce is just asking for trouble.

Most of the time the mortgage is a joint account, at the time of divorce it is usually awarded to one party or the other in the divorce decree. If this is not handled properly, the person that did not get to keep the house can suffer the effects of late payments that there ex-spouse is making or any other bad credit marks associated with the house, including foreclosure. Here are some things you can do prior to the divorce being final.

Ideally you need to sell the house and split the equity. This will not work in all cases. It is best if the selling occurs prior to the divorce being final. If you have an agreement that the ex must sell the house within a certain period of time, they can make it difficult to sell if they are not eager to sell. There won’t be much you can do about it.

If one spouse is going to keep the house after the divorce, insist on them refinancing it in their name only. Ideally, this needs to be prior to the divorce being finalized. Even if it is written into the decree that they must refinance within a certain amount of time, it is not really enforceable.

The worst possible scenario is that selling or refinancing is not an option. This is where most people find themselves when divorcing with children. They will not put the person out of the house that has custody of the children because it would cause undo hardship and in a lot of cases the spouse is unable to qualify for a refinance on their own.  You will hear some of the “experts” say that you can file a quit claim deed and relieve yourself of all responsibility of the house, well it doesn’t quite work that way. What you do is actually relieve yourself from ownership but do not relieve yourself from the debt, so filing a quit claim deed is not a good idea. Try to set a time for the ex spouse to sell the home, for example if your children are in their teens try to set the time to sell for when they are over 18 and moved out so as not to cause the hardship on your children. One other thing you should do is notify the mortgage company of the situation, even though it is not going to take you off the loan, you can still have them contact you in the event of a late payment or something and try to do damage control directly with them. This has worked fairly well for me. My ex has made some late payments and they notified me, I talked to them and they have not reported the payments as late on my credit report, but they do on hers. In fact, Wells Fargo has altogether quit reporting any payments to my credit report whether good or bad.

Next post we will talk about some other debts and how to deal with them during divorce.