Protecting Your Identity in a DivorceFebruary 26, 2018
Most of us know some who’s gone through an ugly separation or nasty divorce, so you may have heard about a form of familiar fraud called “revenge spending.” It’s not uncommon during a breakup for one partner to go on a spending spree, leaving the other partner with the bills. Celebrity cases sometimes make the news: for example, Yankees star Alexander “A-Rod” Rodriguez wife famously treated herself to a $100K weekend in Paris just before filing for divorce. But it happens to non-celebrities, too. One husband took a joint credit card and went on an $8,000 strip club spending spree after he and his wife split. Other ex’s have wiped out joint accounts, defaulted on debts, and even declared bankruptcy to avoid responsibility on joint debts. Actions like these can seriously damage a person’s financial identity, so it’s important to protect yourself during a breakup.
When you are married, your financial identity is tied to that of your spouse. It can happen even if you’re not married, but we’ll cover that in a future article. During a divorce or separation, it’s important to separate your financial identity from the other person’s as quickly as possible. Of course, the first step should be to consult a good lawyer, and the tips given here are no substitute for competent legal advice, but here are five steps that a person can take quickly to protect themselves.
- First and foremost, cancel any joint accounts. This includes joint bank, co-signed credit, and authorized user accounts. If you still owe debts on any accounts, pay off the debts or transfer them to a separate account.
- Establish individual credit. Depending on how closely your finances are tied, you may have limited options to establish (or reestablish) your credit. Some divorce proceedings prevent establishment of new credit during the divorce.
- Notify creditors of your separation. Send a certified letter to your creditors stating that you do not intend to be held liable for any debts after the date of the letter, and request that your accounts are put on inactive status.
- Put a freeze on your credit reports and sign up for identity protection that includes monthly monitoring.
- Immediately alert creditors of suspicious or fraudulent activity on your credit report or any accounts.
Divorce is a stressful emotional situation where even a normally responsible person might do things they wouldn’t otherwise, so don’t let affection cloud your judgement. If the breakup is amicable, the other person should be OK with separating finances quickly. If not, all the more reason to act quickly and protect yourself. By following these steps and consulting with the proper professionals, you can help stay steer clear of disastrous outcomes and even more potential conflict.