There are many worries and concerns when a couple goes through the difficult divorce process. One concern for those who’ve worked hard to earn a good credit score and build savings is how the divorce will affect their bank accounts and ultimately their hard-earned credit scores. It’s perfectly normal to want to protect your savings and assets, especially if your spouse is particularly contentious during the initial divorce proceedings.
Since both parties in a divorce want to move forward with their new life as financially comfortable as possible but what was formerly one household with combined assets and debts now becomes two, each spouse is suddenly facing the loss of half the nest egg they considered their protection for the future.
Whether you’re the petitioner in a California divorce or the respondent, it’s important to understand how divorce impacts your bank accounts and credit score.
California’s Community Property Laws
Couples co-mingle their assets during years of marriage and untangling them can be a complex process. According to California’s community property laws, divorcing couples must split assets and debts 50/50. Community property refers to all assets and debts accumulated during the years of the marriage separate from any inheritances or properties owned by one party alone before the marriage.
While many couples keep separate bank accounts during their marriage, it’s important to understand that these are subject to division even if an account is only in one name and only one party made deposits. This may appear unfair on the surface, but the courts presume that one spouse would not have been able to build the account and accumulate the asset as greatly had they not enjoyed the benefits of sharing living expenses in the household with a contributing spouse. Therefore, the courts consider the bank account as community property.
Once one spouse leaves the home or files for divorce, any assets or debts collected by each individual from that point forward are not subject to division. Each party in the divorce can begin building individual savings by opening a new account. The balance in any individual or joint accounts before the date of separation remains community property subject to 50/50 division. While California is a community property state, by remaining open to communication and negotiation with a spouse during divorce, couples can have a say in how to divide their marital assets.
Credit Scores and Divorce in California
Because credit scores don’t reflect marital status, a divorce doesn’t have an immediate impact on your credit score. However, it’s important to understand that divorce does NOT void your lender contracts. This means the fact that a debt was assigned to your spouse has no impact on the terms of the agreement. If the ex-spouse falls behind on payments or defaults it will negatively impact your credit score since the creditor still holds you liable for that debt. You can minimize the possibility of a diminished credit score by making a plan to manage your debts before and after the divorce decree through the following steps:
- Pay off any joint accounts and close them whenever possible
- Talk to lenders about individualizing any accounts you’re unable to pay off by removing the spouse as a joint account holder and authorized user
- Remove your name from any open accounts assigned to an ex-spouse whenever possible
- Keep communication open and civil with a spouse in order to create a plan for the division of assets and separation of debts during the divorce.
- Facilitate open communication after the divorce so you can remain informed about the resolution of any debts that could still impact your credit.
Talk to an experienced family attorney who understands California’s community property laws so you can learn more about protecting your assets and good credit during and after a divorce.