Divorcing spouses in Illinois are often eager to reach an agreement quickly so they can move on with their lives. Unfortunately, the simplest way to settle thorny financial issues is not always the most prudent. While simply going through a divorce does not impact credit scores, some of the decisions made during property division negotiations could make it more difficult to borrow in the future.
A lesson some former spouses learn the hard way is that banks do not pay attention to divorce decrees when loans fall into arrears. This means that spouses who signed joint loan documents can be pursued for payment even if they have ceded their ownership interests in the car, home or other asset secured by the loan. The only way to avoid this unfortunate situation is to insist that assets secured by joint loans be refinanced entirely in the name of the spouse who receives them under the terms of the divorce settlement.
Failing to do this can lead to credit problems as well as angry calls from bill collectors. When payments are not made in a timely manner on a jointly held loan, the lender will usually notify the three main credit reporting agencies. This means that late payments could appear on the credit reports of ex-spouses who believe that they are no longer financially responsible because of a court-sanctioned divorce settlement.
An experienced family law attorney will likely point out these potential pitfalls to a divorcing spouse when assets that have been jointly financed are brought up during property division talks. Legal counsel might pay particular attention to these issues when divorces are contentious and lingering animosity could prompt one of the spouses to deliberately sabotage the other’s credit rating. In these situations, an attorney may urge taking a strong position and requiring that all joint financial accounts be either closed or paid off.