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Individual and Joint Accounts, A Primer
Jan L. Warner & Jan Collins

SoloFact: Due to many requests for information about credit and debts at the time of a divorce, here is some basic information about individual and joint accounts:

Individual Accounts: If you apply for an individual account, you will be given credit based only on your income, assets, and credit history. Generally speaking, whether married or not, you are solely responsible for paying the debt, and account information will appear only on your credit history -- and may be on the credit report of an "authorized userĒ. There may be an exception, however, if the you are married and live in a community property state which makes both spouses responsible for debts incurred during the marriage. In this event, the debts of one spouse may appear on the credit report of the other. Make sure to find out the rules if you live in Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin.

Joint Accounts: If you and your spouse apply for credit, the income, financial resources, and credit history of each of you will be considered. As such, credit reporting concerning joint accounts will be made in both spouseís names. Each spouse is legally responsible to the creditor for the entire debt, even if the divorce decree provides that one spouse is to pay the debt. Thus, without planning, a former spouse can adversely impact the credit history of the other on a joint account by running up bills and not paying it.

Authorized Users: As an account holder, you may allow a third person -- generally a relative -- to use your individual or joint account, but, you are fully responsible for paying any debt. A creditor may report the credit history of such an account on your credit report and that of the authorized user, but the authorized user is not obligated to make any payment.

If you are thinking about a divorce, try to have all joint accounts closed, and reopened in separate names. But creditors are not obligated to make these changes, and may require that you reapply for credit on an individual basis. Thatís why itís a good idea to think about a way to pay off all joint debt to avoid future credit record problems if the payments are not made according to the court order.

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