Need to File Bankbruptcy?

Divorce raises a whole host of complex issues that can be emotionally and financially devastating. During this time of great upheaval, the last thing anyone wants to deal with is a change in the credit status he or she has worked so hard to achieve. But in many cases, you have little choice.

The first step for anyone going through a divorce or bankruptcy is to obtain copies of your credit report from the 3 major agencies: Equifax, Experian, and TransUnion. After you've gathered the facts, create a spreadsheet, and list all of the accounts that are currently open, including the creditor's name, contact number, the account number, type of account, status, balance, minimum monthly payment, and who is vested (joint, individual, authorized signer.)

There are two types of credit accounts, and each is handled differently during a bankruptcy or divorce. The first type is a secured account, meaning it's attached to an asset. The most common secured accounts are car loans and home mortgages. For these types of accounts, one option is to sell the asset.

Another option is to refinance the loan. In other words, one spouse buys out the other. This only works, however, if the purchasing spouse can qualify for a loan by themselves and can assume payments on their own.

Your last option is to keep your name on the loan. This is the most risky option because if you're not the one making the payment, your credit is truly vulnerable. If you decide to keep your name on the loan, make sure your name is also kept on the title. Imagine being stuck paying for something you do not legally own.

The second type of credit account is an unsecured account, meaning no asset is attached. It's important to know which spouse, if not both, is vested, and it's best to act quickly.