This has come up several times, and so I wanted to write a brief post on what is a common misconception out there. To begin with, consult an attorney to verify the latest laws as we are not attorney and this is not legal advice.
Often times, we will consult with someone who has gone through a divorce. During which, the settlement has who is responsible for what debts. For instance, one is going to pay on the car, while the other person pays on the house etc. Unfortunately, in the creditor’s eye’s, if both parties were on the agreement to pay, originally, then with respect to the credit reports, both parties are responsible to pay. In short, a divorce decree will not dissolve shared responsibility; nor will it have any impact on what is reported by the creditors to the bureaus.
If your ‘ex’ is late on a car that is in both of your names, the late payments will report on your credit. If that car eventually gets repo’d, then the remaining balance will report on both credit reports, if it’s a joint account. Your only recourse, aside from pleading with the non-compliant ex-spouse, is to hire an attorney and enforce the decree by making them pay. This does nothing for the late payments, or charge off accounts however.
I know of no creditor that will review a decree and update the responsibility to match what’s on the decree. They’re two different things.
Ideally, if you are expecting on, or currently going through a divorce, let me first say, I am sorry. Divorces are terribly painful and often times the source of bad credit, so hang in here. But, if you are in the middle of one, do your best to have your attorney spell out in the decree who is responsible for what, I suggest also making the formal transfer of responsibility a condition of the decree. Meaning, at some point, if one person is taking over the payments of the car, or house, that they have to refinance the car or house in their name, so there is an appropriate separation and both parties can move on, both financially and emotionally. Additionally, so that the item does not report as an active and owed account on the credit, thusly not impacting debt to income ratio.
Sorry for the topic gang, but it needs to be mentioned. Protect yourself, advocate for yourself. It will get better and when it does, the last thing you need is to worry about your ex not making the car payment, when you’re trying to qualify for a house.