Dear To Her Credit,
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I have been divorced about six years now. I just paid off all my debts in anticipation of trying to get a home loan with a rather modest income. I pulled my credit score to see how I was doing. It's pretty good, but I was surprised to find it could be about 50 points higher because, from the credit report, it looks as if I am about $40,000 in debt.
My ex (who was unable to acquire credit on his own after the divorce) has apparently gotten hold of two old credit cards that were issued in my name. One is an old joint account that was never closed. One is in my name, but he was an "authorized" user on the account. In just this past year he has run up nearly $40,000 in debt on these two cards.
Am I responsible for this debt or is he fraudulently using the cards? I need to get this cleared up so I can be approved for a home loan. This man drives around in a Porsche and lives in a $2 million home. I have an old Subaru and live in a modest rental.
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Oh, no! That's just about the worst financial news you can get six years after a divorce -- that your ex has found some old credit cards and is using them again -- and to the tune of $40,000 no less. That's a lot of fancy restaurants and gas for his Porsche!
The experts I consulted were all quick to point out how important it is to close all accounts as soon as a divorce seems imminent, and to keep checking your credit report at least once a year from then on in case something got missed. You understand that now. Unfortunately for you at this point, that's like locking the barn door after the horse is gone.
The prospects for getting out of this debt are not good. Todd Huettner, president of Huettner Financial, a Denver consulting firm specializing in divorce finance, sees this all too often -- sometimes five or 10 years after the divorce. He says, "While she may have legal recourse available to her, she is likely liable for the debt and her credit will be adversely impacted or even destroyed. Meanwhile, she could spend thousands on legal fees and never get a dime out of her ex-spouse."
Denise Winston, a Bakersfield, Calif., banker turned financial educator, had a similar experience. Years after her divorce, she pulled her credit report and found a joint card still in use. She was lucky -- the account balance was small and she was able to have the account closed immediately. Winston says, "My experience as a banker is that a joint account is a joint account no matter how old it is, what the balance is or payment activity has been. Check the state laws and the divorce decree; the decree may say he has to pay but the bank has her binding signature on the account and can hold her responsible."
Although your situation looks bad, I wouldn't give up and start paying off the terrible ex's debts just yet. Consider these issues:
First, why are these accounts open? Are you sure you didn't close them, only to have him reopen them without your consent? According to Mark Hankins, author of "Debt Hope: Down and Dirty Survival Strategies," it can be easy to reopen an account. He says, "Many issuers will close a card but allow a 30-90 day window for the customer to reopen it -- and he may have known that and taken advantage shortly after appearing to comply with the decree." If your ex did so without your permission, that's fraud.
Even if an account wasn't closed, bank credit cards don't generally stay active without use for six years. "If the divorce was six years ago, the card was probably updated (new expiration date), and someone would have had to renew it," says Florida mortgage and finance expert Mike Arman. That, too, could give you a case against him.
The divorce court should be on your side. Although the divorce court cannot change who is liable for a debt, it can say who should pay a debt. If he has assets and can pay the $40,000 balance, it may require him to do so.
Your high-flying ex might even volunteer to pay off the debt or transfer it to an account of his own if you ask. Let's hope he found these cards and started using them without realizing they were still joint accounts. If he has any honor, he'll quickly retire all debt with your name on it. Perhaps knowing that you may have a case for the police or the divorce court may help him remember where he left that honor. We can hope. If he resists, I suggest getting qualified legal help in your state. Your financial future for many years to come is at stake.
From now on, take care of your credit by checking it regularly or paying for a credit monitoring service. You may even want to put a credit freeze on your name so no one can open accounts in your name without clearing additional hurdles.
Congratulations on paying off your own debts. I hope this is cleared up quickly and that you are settling in to your new home very soon.