SPEND RESPONSIBLY - Handling hard times
Separation and divorce
Going through separation and divorce can be a tough time. But it’s estimated that as many as 40% of all marriages will end in divorce, making it a reality of modern life. At a time when emotions may be running high, you still need to organise your financial life – reaching agreement with your former partner about the division of your shared assets, and establishing your own credit identity.
A divorce doesn’t necessarily affect your agreement with existing credit providers. You are still responsible for paying an individual account if it is in your name. It is when you have debts in joint names that you need to take care. You may have separated physically but you are still jointly and perhaps even individually responsible for paying off shared debt. This means that even if your former spouse or partner fails to make repayments, you can still be called upon to make the repayments yourself.
A good credit bureau file is important in establishing your ability to borrow money in the future. So, it is worth protecting your credit bureau file to aid in becoming an independent credit customer.
The following steps can give you a guide to achieving this.
1. List all credit accounts
List all loan and credit card balances, setting out which accounts are in joint names, when the payments are due and the amounts that are outstanding.
2. Keep up the repayments
Even if you believe your former spouse should contribute to the repayments, it is vital that you keep up the repayments otherwise you could tarnish your own credit bureau file.
3. Contact your credit providers
Let your credit providers know that you and your spouse have separated. Reputable credit providers will often work with you to reorganise your repayments. To be on the safe side, you should always destroy any joint cards or additional cards that have been issued for your account, or request that they be cancelled.
4. Separate your joint credit
Credit providers are not required to convert a joint credit account to an individual account, but it is a good idea to approach your credit providers and request that your former spouse be removed as an authorised user of your account. This is especially the case if your former spouse can independently use the credit facility.
5. Establish independent credit
When you first separate it may be difficult to obtain credit either because of your lower income, or because you may not have an independent credit bureau file. You may also find that your credit limits are lower. Discuss your situation with credit providers, but bear in mind that by maintaining a good credit bureau file now, the situation should improve over time.
6. Review your entitlements
After separation, you may be entitled to social security payments like ‘Parenting Payment’ or possibly for additional benefits as a sole parent. Contact Centrelink on 13 6150 to see which benefits you may be eligible for.