Whether the financial problems are the cause or the effect of the marital discord, the debts can be a significant issue in the settlement or litigation process. When your wife is not interested in being fiscally responsible in the divorce – whether because she has never been good with money or as a misguided effort to do you financial harm – resolving the debts will be even more difficult and may require a financial advice divorce consultation. The math portion of the debt division will depend upon various aspects of your marital finances and is often the focus of attention. However, before you and your attorney can get to the division issue, the debts have to be identified. Sounds like a “no-brainer”, doesn’t it? However, if you have been the wage earner but your wife has been handling the checkbook, you could be unaware of the actual extent of your debts. Or perhaps you have been separated (physically or just financially) while trying to work things out and your wife has been keeping her own books. You may be surprised to find out what is, and is not, your debt.
To track your debts, and as part of the demand for information from your wife, a key element is obtaining the credit reports. While potential lenders rely heavily on your credit “score”, the underlying information about your debts and payment history are in your credit reports. The major credit reports are from three companies – Experian, TransUnion, and Equifax. As each maintains separate information and not all creditors report information to all three companies, it is important to get all three reports for as complete a picture as possible. As it is a violation of federal law to improperly obtain another person’s credit report without proper authority, including your spouse’s, each party should obtain their own credit reports.
Federal law entitles you to get your credit reports once each twelve months at no charge. The simplest method is on the internet at the www.annualcreditreport.com website. While not a federal government operated website, it is how the three major companies comply with the requirement of making your reports available at no charge. You may be offered other fee-based services, such as your credit score or credit monitoring, but you can bypass those offers and just get the reports. This website is not to be confused with other similarly named websites that require you to sign up for a “free” 30 day service to get your information. If you are comfortable that your computer and internet connection are secure, you may download and save your reports instantly. If you prefer, you can request the reports be mailed in about two weeks.
Once you have your reports, you may need some assistance in discerning the information. First, the reports list all your accounts for the past seven years (or more) such that there may be pages of information on closed accounts. In a remark or in the heading for each account it will indicate if the account is closed. If there is no indication that the account is closed, then it presumed to be an active account. With unsolicited credit applications received in the mail and the ease of opening accounts online, it is not impossible for a wife to submit an application in joint names or even in just your name without your explicit knowledge so that you may find that you have accounts of which you were unaware.
Once you have identified the active accounts, you can review the payment history to confirm your understandings or, if your wife has been responsible for paying the bills, to confirm that she has been making the payments. You should also review the payment history on any recently closed accounts to verify what accounts have been paid and when, in the event there is an issue as to how she has handled the family funds.
Next you can confirm the outstanding balances on the accounts to help determine the extent of the debts. While you probably review the monthly statements that come in the mail or email, you may have missed some or some may have been “misplaced” or deleted. While the credit reports are not the primary source of tracking your exact debts and you may still have to go to individual creditors for “hard” numbers, the credit reports will give you a reasonable check on what you thought, or had been told by your wife, are the family debts.
For a relatively short-term marriage, the date on which the account was opened and the balance history may be important to identify how much debt each party had going into the marriage if pre-marital debt is excluded from the divorce decision under state law. The credit reports will help you identify any accounts for which you may require obtaining a more detailed charge history from the creditor to ascertain how much or which debts are not marital.
Another key piece of information is any notation on accounts as to any write-offs or other compromised debts. If you or your wife make a deal with a creditor or debt consolidator to forgive or reduce a debt, or the creditor unilaterally writes off a debt as uncollectible, there may be a notation in the credit report. Complications arise when the write-off or compromise is not properly documented to completely eliminate the debt from future demand for payment or your wife tries to claim having “paid” a debt when she actually agreed to a write-off that adversely affects your credit. Any debts that show a write-off or other compromised amount should be confirmed with the creditor before being eliminated from division or being credited as paid by one party.
Perhaps most important is the identification in the reports as to liability on the debts as joint, individual, or authorized user accounts. As to the creditors, the person(s) who applied for the account is/are primarily liable for the debt, regardless of the terms of the divorce or who incurred the individual charges. Any accounts shown as joint need to be properly resolved through total payoff and closure, or transfer into an individual account, to avoid the creditor pursuing collection from you when the wife is assigned the debt in the divorce resource. Many times what is thought to be a joint account is in fact an individual account with the other party being an authorized user. On your credit report, “individual accounts” are those on which you are the only applicant while any of your wife’s individual accounts on which you were given access are shown as your “authorized user” accounts. As the liable party for the individual accounts, you normally will want to keep control of those accounts and not have your wife ordered by the court to pay debts for which you are liable to the creditors to avoid problems in the event of non-payment by your wife.
As with all aspects of addressing family law issues, information is critical and keeping current on your credit report is a vital piece of information to have at your disposable, and easily obtained, to fully consider the financial issues.