Editorial Policy

7 steps to avoid revenge debt during divorce

Tina Orem

March 26, 2015

Divorce is traumatic enough, but when your ex runs up joint credit cards or fails to pay the mortgage out of spite, the impact to your credit can suffer as well.

Bottom line: Ensure that the divorce agreements are followed through on, so you don't get a call two years from now. Here's what the experts say you should do before and after a divorce to avoid becoming a victim of “revenge debt.”

1. Check your credit reports.  If you're not already doing so, check your credit report often. You can do it at AnnualCreditReport.com, and because you're entitled to one free report a year from each of the three reporting agencies (TransUnion, Equifax and Experian), you can stagger the requests so that you get a free report once every four months.

2. Nip it in the bud. “My best advice for people who want to avoid getting stuck with debt their spouse incurs is to file for a divorce or separation as soon as you see it on the horizon,” says Indianapolis divorce attorney Jaimie Cairns. “The divorce action can serve in a way to protect you from debt that is incurred when things turn ugly.”

Most courts in Indiana, Cairns explains, look at what a couple has accumulated as of the date they filed for divorce. If a spouse incurs a bunch of debt after that, they're usually stuck with it entirely, she says.

3. Pay off debts before filing. “This seems like the obvious answer, but not enough people do it,” says Scott Kimberly, an attorney in Murfreesboro, Tennessee. Courts in most states divide marital assets equally, including money in bank accounts. If you can pay off any existing joint debt, get it done now, he advises. Similarly, consider returning or selling assets that are secured by joint debt and paying off those debts. “Yes, the assets you are dividing in the divorce will take a hit; however, you will avoid the headache of post-divorce joint debt,” he says.

4. Get a financial restraining order. “In most states, including Tennessee, where I practice law, a financial restraining order is issued upon the filing of a divorce, which prevents the parties from accumulating new debt for the marriage,” Kimberly said. “Further, you can seek a temporary order from the court barring your spouse from accruing additional debt. If the restraining order issues and/or you attain a temporary order and your spouse continues to take out revenge debt, you can seek relief through the court, which may include financial penalties and, because additional debt is a violation of court order in these cases, even jail time.”

“If your spouse is hell-bent on taking out new debt, they might be able to make it happen. However, there are safeguards.”
–Scott Kimberly, Tennessee attorney

5. Get off the accounts. “If a consumer added her husband as an authorized user to her credit card account, it is a simple process to call and have him removed from the card,” says Michelle Black of credit education group Hope4USA. “However, if the credit card is a joint account, then the process becomes much more complicated.” For example, it becomes more difficult if money is owed on the account. One way to handle that is to transfer the debt to cards you and your ex individually hold and close the joint account.

6. Figure out what to do with the house. “There are really only a handful of options regarding what to do with a marital home that has a mortgage in both parties' names in a divorce: Spouse A will keep the home, refinance and remove Spouse B's name; Spouse B will keep the home, refinance and remove Spouse A's name; or the home will be sold and the parties will equally divide the proceeds or loss,” Kimberly said. “That being said, I often see situations where Spouse A will agree to refinance the home, the parties will get divorced, then Spouse A will be turned down for financing. Now what? This problem can be avoided if the party being removed from the mortgage demands that the party refinancing the mortgage get pre-qualified prior to the divorce. If your spouse wants the home but doesn't qualify, demand that the house be sold in the divorce.”

7. Place a credit freeze on your credit. A credit freeze limits access to your credit report, making it more difficult for fraudsters to open accounts in your name. “It's not uncommon for an angry spouse to use the other spouse's information to open new credit cards and use them,” says Laurie Zoock, with Credit Education Consultants. “While it's obviously illegal, the innocent spouse is often unwilling to press charges. Now, they owe money on those credit cards, and their credit is destroyed. Placing a credit freeze will make it more difficult (but not impossible) for the angry spouse to open more accounts.”

However, you will need to temporarily “thaw” the freeze when you apply for credit, so timing is important.

Neither you, your lawyer, the court nor anyone else can control what other people do. Kimberly warns, “If your spouse is hell-bent on taking out new debt, they might be able to make it happen. However, there are safeguards.”

No matter what, “resist the urge to throw the first punch financially,” Black warns. “If you have children, keep in mind that damaging your former partner's credit could hurt your kids in the long run since it will impact his/her ability to provide for their needs.”