Divorce your Credit. So, you’ve divorced that lousy no good person to whom you were once married. You are rid of them once and for all, Right? WRONG. You may still be obligated on creditor accounts with that despicable Ex-Spouse. Credit cards, mortgages, car loans, and installment accounts may still haunt you EVEN IF THE DIVORCE DECREE says the Ex-Spouse is supposed to pay.
a. How do you protect yourself if the mortgage is not paid by Ex-Spouse?
b. What if Ex-Spouse opens a new account after your divorce with YOUR credit information?
c. What if Ex-Spouse is supposed to pay the car payment but gives the car back for repossession?
d. How do you get items like this off your credit report? Can you get items like this off your credit report?
Property possessed by either
This presumption may be rebutted by proof that the lender agreed to look only to the separate property of the borrowing spouse for repayment. Cockerham v. Cockerham, 527 SW2d 162 (
Sec. 3.201. SPOUSAL LIABILITY.
(a) A person is personally liable for the acts of the person's spouse only if:
(1) the spouse acts as an agent for the person; or
(2) the spouse incurs a debt for necessaries as provided by Subchapter F, Chapter 2.
(b) Except as provided by this subchapter, community property is not subject to a liability that arises from an act of a spouse.
(c) A spouse does not act as an agent for the other spouse solely because of the marriage relationship.
Added by Acts 1997, 75th Leg., ch. 7, Sec. 1, eff. April 17, 1997.
Property purchased on credit during a marriage is community property unless there exists an express agreement on the part of the lender to look solely to the separate estate of the purchasing spouse for satisfaction of the indebtedness. Glover v. Henry, 749 SW2d 502 (Tex. App. – Eastland 1988, no writ).
Some cases on Spousal Liability.
a. In an action to recover from the wife for debts of her husband, the wife was entitled to an instruction regarding the circumstances under which she could be held liable for the debts of her spouse, pursuant to former Tex. Fam. Code Ann. § 4.031(a) and (c); the spouse is only liable when the purchase was for necessities or if the spouse was acting as agent. Carr v.
b. Judgment against a wife for the debts of her deceased husband's business was reversed as the evidence was insufficient to support the jury's findings of apparent authority and ratification; the business was the husband's special community property. Patel v. Kuciemba, 82 S.W.3d 589, 2002
c. Because a marriage does not make one spouse the agent of the other, under former Tex. Fam. Code § 4.031(a), suit to collect a debt signed by the husband did not make the wife a party. Marynick v. Bockelmann, 773 S.W.2d 665, 1989
There is no magic way to avoid liability for enforceable debts of the marriage. However, you can mitigate the long-term effect of the performance (or non-performance) of the Ex-Spouse on your client’s credit reporting and on your client’s balance sheet.
In brief summary, here are the steps that should be taken to Divorce your client’s credit.
a. Close ALL joint accounts with low or zero balances. This is probably the biggest area for future problems. That forgotten department store credit card, furniture store account, mail order account, or emergency credit card may be inactive but open. CLOSE IT. If necessary, have the client open a new account in the client’s name only. This should be done as soon as possible but no later than 90 days after the divorce.
b. Obtain a credit report 90 days after the divorce. Review the report and confirm all accounts and activity. Take immediate action if unknown accounts have appeared or questionable activity has occurred.
c. Obtain Duplicate notices for joint credit. Contact the creditor and request DUPLICATE notices for open joint accounts with balances. Even if Ex-Spouse is ordered to pay the account by the divorce decree, Client may still have an obligation to the creditor. Knowing about the problem early is probably the easiest way to correct it. If the creditor refuses to send additional notices to Client, Client may have created the affirmative defense of equitable estoppel or waiver in a later collection lawsuit by the creditor.
d. Make accord and satisfaction offers. Offer a sum of money in exchange for a release on the debt. See the outline below.
e. Communicate with the CRAs. Let them know about the divorce and any name changes. Aggressively dispute any incorrect items on the credit report. See the outline below.
f. Create a plan for dealing with the debt. Client should set priorities for dealing with all post-divorce debt and follow a disciplined approach to dealing with it. Too often Clients in financial trouble become disoriented when they receive collection calls or dunning letters from creditors. Sticking to a post divorce debt plan can help the client stay on track.
Of course, the effort for the client depends on their credit history, the number and duration of joint credit accounts, age, income potential and a host of other variables. But at least some effort should be placed on this area of growing importance.
Call me if you are getting divorced and need help with these issues or if you have obtained a divorce and need to resolve some of these matters. Or refer to my legal article on Divorce Your Credit