“Dear Steve,
I have been divorced for one year. Our house was in my name and husbands. He never refnanced or sold the home. His late payments have started to ruin my credit report and credit score. Now it look as if the bank will foreclose. How can I repair my credit and how long will it take me?
Karen”
Dearest Karen,
Often there is a hidden silver lining in debt situations but in this case there is little good news to share, only bad. I’m sorry, I’d rather be there with you as you read this and give you a big hug to let you know that in the long run things will get better. You see Karen, I’m afraid the problem is even worse that it currently appears.
I suppose the good news is that there are solutions and you can look forward to a brighter future, but not just yet. It may get worse before it gets better and you’ll have to take some action first.
When people get divorced they don’t realize that while you can divorce your spouse, you can’t divorce your creditors. Joint creditors and debts before the divorce are joint creditors and debt after the divorce. While you might have had an agreement between you and your husband to each be responsible for some bills, or in your case, he was to cash you out of the home but that agreement is between you and you ex and not you and your creditors.
The problem is that this is a horrible time to refinance or sell a property in many locations. He just might simply not be able to afford the property and can’t find a lender that is willing to even talk about refinancing. The banks are in a mess right now with all their bad loans they wrote and the credit markets have all but seized up. Borrowing money is tough right now and homes are worth less than they were.
Here is the really bad news, since you and you ex-husband are jointly obligated for the mortgage, if the bank forecloses they will probably come after all the obligated parties for any balance due. So even though you are out of the house and he is supposed to pay the bills and give you your share of the house, you can easily wind up in collections and be sued for any balance due after foreclosure.
This post-divorce joint surviving liability applies to any other joint debt that you two had together from before your divorce.
The past due payments, foreclosure and if you are sued by the mortgage company for any balance due will all wind up on your credit report. That is why the worst may not even be close yet.
There are a couple of things you can do right now. Here is what I suggest:
- Immediately get a copy of your consolidated credit report. Hands down I think the best type of credit report to get right now is going to be my recommended consolidated credit report. You can get yours online right here.
- After you print out your credit report you will be able to instantly identify any joint accounts you may still share with your ex-husband, see if they have any balance and see if they are on-time or past due also.
- Contact your ex-husband and try to schedule and have a non-confrontational discussion about the realities of the situation. I want you to leave that meeting with some sort of factual understanding about his ability or intention to bring all the joint accounts current and not allow them to go delinquent any more.
- If you leave that meeting feeling like he’s got the situation under control and will bring the mortgage and any other joint debts current and keep them current then there is little more to do at this time. You will still be linked to him on those joint debts but as long as he goes back to paying them on-time then your credit report and credit score will improve.
- If you leave that meeting and you have no confidence that he will be able to honor his end of the financial deal between the two of you and the home is headed for foreclosure then we are going to have to take more drastic action.
Typical Worst Case Scenario
What usually happens in these situations is that the person responsible for the bills that is unable to pay them, files bankruptcy and dumps all the joint debt on the other spouse, in this case that will be you. That’s why it is so important for you to look at your consolidated credit report with all three credit bureaus on it to see what you may be on the hook for.
Once all that debt is dumped on the other spouse, again, you in this situation, bankruptcy is typically necessary also.
You see that outside of repaying the creditors, the only way you can terminate this debt is to either sue your ex-husband, win a judgment against him and go after any assets he has to repay the debt, or go bankrupt and end your obligation for these debts.
It is doubtful that suing your ex-husband is going to be affordable or fruitful. This means that like it or not, you’ve got a real good chance of finding yourself in the office of a bankruptcy lawyer looking for a free bankruptcy review.
Do You Have a Question You'd Like Help With? Contact Debt Coach Damon Day. Click here to reach Damon.
If the house situation looks terminal and your husband is not going to be able to save it from foreclosure, you might want to strongly consider getting out ahead of this and go speak with a bankruptcy lawyer now. If you go bankrupt first then you will close the door on these debts and creditors will NOT come after you when they go bad. You will dump this entire situation in his lap, you’ll be able to walk away from it and you’ll be able to start rebuilding a positive financial life sooner rather than latter.
So Here Is The Good News
The bit of good news is that once you take care of addressing these issues and go bankrupt, then we can focus on rebuilding your credit. It is possible and it will take a year or so to get you back to a good credit score.
I’ll give you advice on that and guide you on how to repair your credit but it is too early for that now. We need to address the other issues first.
There is more pain to come but life will be so very much better afterwards. Trust me, I’ve been there myself.
A great big bear hug for you.
Steve
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Dear Steve and Karen,
I am in the exact same situation, however I am not divorced yet. We have been separated for 20 months – not divorced because we cannot come to agreement on the house. I left him the house because it is worth 3X less than what we owe (OUCH!). To top it off, I have signed two loan modifications to help lower the payments and he STILL DOES NOT MAKE THE PAYMENTS ON TIME! Am I STUPID? On top of that I let him have the truck which is also in my name – owing over $12,000 and he doesn’t make those payments either. In the meantime I am driving a car that cannot pass smog and needs tons of work because and I cannot get a loan for another car because he absolutely destroyed me.
My divorce will be final in April 2010 and then I am going to see a bankruptcy attorney.
Thanks for the advice.
Christine,
Don’t wait. Go see the bankruptcy attorney tomorrow within the week and plan to take action before creditors start suing you. Be proactive. It’s less stressful.
Steve