Credit Score? Debts? What Can Be Transferred After a Divorce or Breakup?

When parties marry or live together, they frequently will use the credit of the party who has a higher credit score. This might make sense at the time, because perhaps a lower interest rate can be obtained or one party’s credit score is so low they are not credit-worthy.

Subsequently, if the parties break up, the debt will remain the obligation of the party whose credit was used. In a divorce situation, if a party wants an asset (Party “A”), but the debt is in the name of the other party (Party “B,” aka the debtor), if Party A gets the asset, and even if Party A tells Party B they will pay for the debt on the asset, Party B remains liable for the asset. The creditor can only go after the individual with whom it has a contractual relationship.

When parties live together, the result is the same. Party B is always going to be liable for the debt regardless of an agreement with Party A.

Further in a divorce situation, generally both parties are on the note to the parties’ residence. Presumably, one or the other party will be awarded the property in a divorce. Very likely, both parties will remain liable on the note, because a mortgage company will be unwilling to release a party when they have a contractual relationship with both parties.

The party not being awarded the property should be aware that remaining on the note for a house reduces their ability to obtain additional credit. The party not being awarded the residence upon divorce might be disappointed that they cannot purchase a comparable property, because of their obligation on the house that was awarded to the other spouse in the divorce.

Treat your credit score like other secured information – keep it safe and in your control. Credit is a lot of fun until you get stuck with the bill!