The Perils of Joint Credit

Joint debt forms a union that can be more powerful than marriage. So powerful that not even a legal divorce can dissolve it.

Yet it is faster and easier to enter than a marriage.

With joint debt, you are responsible to the creditor – even if you get divorced from the other joint debtor.

A divorce court may order the other joint debtor to pay off the account and to protect you against liability on it but, even so, that creditor can still come after you.

For the entire amount of the debt. Not just half, as many, many people seem (mistakenly) to believe.

Your only recourse if that happens is to your ex, back in family court.

Even if you are only a so-called authorized user on an account, a creditor may try to collect from you for the charges that you made on the account. In that situation, you are not legally responsible. But they can try.

If you are a co-signer on a debt, you are like a guarantor. You are responsible for the entire debt if the primary account holder doesn’t pay. But you don’t have access to or control of the account.

And with any joint debt, the entire amount of the debt counts against your credit history and outstanding debt for purposes of underwriting any other borrowing you may wish to do.

That is one reason why a divorcing spouse moving out of the marital home almost always wants his or her name removed from the mortgage on the marital home. They probably will not be able to qualify for a new mortgage of their own on a new home of their own otherwise.

And if the other joint debtor doesn’t meet their obligations, your credit score will be penalized too.

The removal of a joint debtor (such as by death or divorce of a spouse) can also reduce your access to credit. To protect yourself, it is prudent to maintain some individual credit accounts for a rainy day.

In some marriages, it may be prudent to keep all debt individual rather than be adversely impacted by your spouse’s questionable management of their credit.

When it comes to divorce, it is best whereever possible to close joint accounts, preferably by paying them off or, alternatively, by transferring all or part of the balance to one or more individual accounts of the divorcing spouses.

Read more in this article: 6 Secrets About Joint Credit.