smart spending

5 ways divorce can cost you

Shared debt responsibilities
Shared debt responsibilities © Nikola Bilic/Shutterstock.com

You and your spouse share responsibility for joint debt, such as credit cards, car loans, mortgages and other personal loans. During divorce, payments for these debts are split between the two of you, but the legal obligation still rests with each of you as long as both names are on the debt.

"A divorce decree is between you and your spouse only," says Maxine Sweet, vice president of public education for Experian. "It has no legal impact on your contractual obligations."

That means you may have to trust your ex to make payments on a debt as agreed. If your ex-spouse doesn't, the lender is allowed to go after you for the debt and report the delinquency on your credit report, damaging your credit score.

Sweet suggests that you and your ex each take out a separate consolidation loan to pay off joint debts. For jointly held credit cards, ask the issuer to close the account to new charges until the debt is paid off. At that time, close the credit card account altogether.

Mortgages are harder to resolve, because it requires refinancing to remove you or your ex-spouse's name from the home loan. But you (or your spouse) may not be able to qualify for the mortgage on your own. In that case, it may make more sense to sell the house and split the proceeds, says Sweet.

advertisement

Show Bankrate's community sharing policy
          Connect with us
advertisement
FRUGAL NEWSLETTER

Discover new ways to cut costs and save more every day. Reduce your spending, not life’s pleasures. Delivered weekly.

advertisement
Partner Center
advertisement

Connect with us