Divorce

Protect your credit and your money if you see a divorce in your future

If a divorce is in your future, it’s time to get your credit and finances in order. Before you know it, you will be on your own, usually with no one else there to share in your expenses. This means that you need to organize all your financial information beforehand, including bank accounts, credit lines, loans and taxes, to fully prepare yourself during this challenging time.

Consolidated Credit recommends the following steps to reduce your stress and make the divorce process more tolerable:

Step 1. Open your own savings and chequing account

If divorce is on the way, your joint finances may get messy. If a situation turns nasty, a spouse may even write bad cheques, overspend and abuse their spouse’s money. Therefore it’s important to open your own accounts so you can start saving money to be prepared for the worst. Doing so will give you a head start on paying off your credit card debt and other expenses you will owe at the time of your divorce.

Step 2. Close Joint Accounts

Check with your lawyer first; however, in a joint account, you and your spouse are financially responsible. Be aware; however, that each person is legally responsible to pay the creditor for the entire amount of debt, even if a divorce decree states that only one spouse is responsible. For example, if you keep your name on a credit card account, and your future ex-spouse decides to go on a spending spree with the card, you will also be responsible for paying that money back, and vice-versa. Even after the divorce is settled and the decree states that your spouse must pay, if the account is not paid for, your creditor can hold you responsible for the debt.

There are different ways to avoid this situation, first, close your joint account and transfer the balance between accounts in each spouse’s name. To do so, all must be agreed upon between you and your spouse as to how the debt will be divided, and you must contact your creditor to be let go from the joint account. If you open your own account, make sure to remove anyone that has “authorization” to use the card, as it’s your responsibility to pay off the debt.

If there is absolutely no way to separate the accounts, then the best thing to do is to specify in the divorce decree that your spouse must communicate with you if a monthly payment will be missed, so at least you can hopefully make the payment and not damage your credit.

Step 3. Order Your Credit Report

Take a close look at your credit reports from the Credit Bureaus in Canada, Equifax and TransUnion. Take a close look to make sure there are no errors. You can find more information about credit reports in our credit score section.

Keep in mind, you are still responsible for all joint accounts and if your ex-spouse missed payments, then lenders will record this negative information on your report. This will result in a damaged credit score, making it more difficult for you to open new individual accounts once your divorce is finalized.

Step 4. Create a New Budget

Now that you are no longer working to pay the monthly bills with your partner, it’s time to start building your own budget to meet your new lifestyle. First, evaluate your income after expenses, and determine if you need to change your budget, cut expenses, or even get a second job to remain financially stable.

Cutting expenses can be a great life saver if your budget isn’t balanced because of your loss of income. Saving money could be as simple as moving to a smaller, more affordable home, or trading in your car for a less expensive model. Other ways to cut expenses are by reducing extra costs like cable television or cancelling a gym membership, and adjusting your eating habits by making home made meals to avoid eating out at restaurants.

Step 5. Establish Your Own Credit

The first step to establishing your own credit is paying off all your debt as established in the divorce decree. This means, you need to make payments in full and on time and without missing payments. If you do qualify for a low limit credit card, use it lightly and only charge what you can afford to pay off.

If you don’t qualify for an unsecured card, get a secured credit card. With this kind of card, you will deposit the amount of the credit limit. For example, if you deposit $400 on the card, your credit limit will be $400. By using your card for purchases and paying on time, you will demonstrate that you can handle credit and are a good risk. With time and patience, you will begin to re- build your credit ranking.

Feeling hopeless? Ask for help

If you are finding yourself further in debt after a divorce, and want advice on how to better manage your money, or if you just need help getting your finances in order, call Consolidated Credit at or request a Free Budget Analysis online.

While Consolidated Credit can help on the financial side of things, you may wish to seek legal advice or other online resources by visiting websites such as DivorceAngels.ca.