In today's challenging residential real estate markets in Massachusetts and around the country, many people considering a divorce may not know where to turn when it comes to dealing with their residential property during or after a divorce. Questions arise as to what the divorce will do to your individual credit scores and how you should handle the mortgage if one spouse wants to keep the house, but cannot qualify for the mortgage on his or her own.
First, a divorce in and of itself does not negatively affect your credit score, since marital status is not used when assessing whether a person is credit-worthy or not. However there are several ways a divorce can have an indirect impact on your credit. Many married people have a number of jointly owned assets, such as real estate, investments as well as credit accounts, such as checking and credit cards. How you determine to handle these debt obligations in your divorce may affect your credit.
Understanding how to go about a financial separation can go a long way in preventing your credit from being negatively impacted by your divorce. First and foremost, a divorce decree does not change the financial obligations you have made to creditors. If you and your spouse agree, either through a settlement or a court order, to have one spouse pay a specific debt such as a jointly held credit card, the credit card company can still go after both parties listed on the account.
When it comes to residential real estate, it can be difficult to separate yourself from the mortgage obligations. In cases where one spouse lives in the house after the divorce and agrees to be responsible for the mortgage, both parties may be held liable for the mortgage debt unless the loan is refinanced and the other spouse's name is removed from the loan.
This can get rather tricky since both spouse's names might have to remain on the mortgage for a variety for reasons. In divorce cases involving intricate real estate issues, it can be important to have an attorney who understands the complexities of both real estate and family law in order to best protect your rights over the marital property and or your obligations to pay for it should the other spouse fail to make the agreed upon payments.
Source: MSN Money, "How divorce affects your credit," Rob Berger, Aug. 3, 2012
Our family law and residential real estate law firm handles a variety of complex real estate issues, including the division of real estate assets and liabilities in divorce.