If you are in the middle of a separation, My CRA can’t stress enough how important it is to look forward into the future to ensure that it does not impact on your credit rating.

Emotions are running high – and sometimes tempers as well.  People often use financial ties to deliberately hurt one another.

The most important and sensible decision the two of you can make during the separation is to cut all financial ties and as early in the separation as possible.

Don’t hold on to joint accounts and assets ‘just in case’ you reconcile.  Even the most amicable of separations can potentially turn sour down the track.  The sooner you make the break, the better off your future will be – even if you do decide to get back together in the future.

What happens if my ex has run up debt in joint names?

As far as the credit providers are concerned if the debt is in both names, then you are both responsible for it regardless of who accrued it.

For them, there is no such thing as a broken heart, just a broke person.  Your aim should be to clear that debt and repair your credit rating as soon as possible.

My CRA can help you formulate a plan of how to attack the problem – starting with the cancellation of the account it originated from, advice on contacting the creditors to arrange repayments and finally helping you to repair your damaged credit rating.

I have just separated from my spouse – what do I do now?

It is recommended these steps be taken as early in the separation as possible to ensure protection of your credit rating.  If these steps can be accomplished together, you can both get on with your lives as individuals sooner:

Cancel joint bank accounts.  We recommended that you use the money from these accounts to go towards paying off any debts you may have together.

Pay off and cancel joint credit cards. If the debt on the card/s can’t be paid off, inform the creditor that you have separated and ask them to put a stop on the account so there may be no more transactions.  They could even make arrangements to transfer the repayments to two separate accounts.

Resolve the mortgage debt.  Sell the home and divide the proceedings, or sell your share of the home to your ex-spouse or vice-versa. Before this takes place, notify the bank you have separated.  Make sure no further amount can be redrawn on the loan and that you receive separate statements whilst you are separated and both still own the property.

Transfer names on other accounts. Phones, electricity accounts, rental properties, rates, car loans and store credit should all be transferred to one name as appropriate.

Pay any unpaid accounts. No matter who has accrued these debts, the credit providers will still see you as responsible.

Keep a record of all undertakings. Ensure you keep paperwork related to the separation, including cancellation or changes to any accounts for future reference.

Employ a good family solicitor.  Legal advice is important as it relates to children, family businesses and property.  Also if anything runs off course with division of debt, they can give good advice on the next course of action.

Notify credit reporting agencies. Let Veda Advantage, Dun & Bradstreet, or Tasmanian Collection Agency know of your separation and any steps you have taken to separate accounts to date.

Check your credit score. Request a copy of your credit rating and check each entry.  Sign up for Veda Advantage’s ‘Veda Alert’ facility, which sends you a copy of your credit rating report every 12 months and notifies you of any changes to your file.   This is essential particularly if settlement is drawn out over a number of years.

Seek help from a credit repairer for any defaults, writs or judgements. Once accounts are paid, if you decide to deal with the credit reporting agencies directly, they will tell you that defaults are never removed but can be marked as paid.  However, at the moment these black marks against your name can be enough for credit refusal, particularly if you are trying to buy a new property on one income.  My CRA will be able to access your file and will assess whether they can remove the default for you. Our current success rate is 91.7% of all cases we take on having their credit file default-free.

(15/10/2011 Update: turn around times have increased on some files to 45 – 60 days due mainly to the delays in processing from creditors and ombudsman services.)

MyCRA is contactable on 07 3124 7133 or www.MyCRA.com.au

Please Note: Our previous results of up to 91.7% have applied to consumer applications and past results are no indication of future performance.