Wednesday, August 22, 2007

Divorce and finances

San Francisco Family Law Blog has a longish post with the title How Will My Divorce Affect My Credit?. Until October of 2005 I practiced bankruptcy law and I got to say that many of bankruptcies came from divorces. I found only one point I disagree with.

Notify Creditors of Your Divorce — Once you have separated/canceled all of your joint accounts/debts, you are no longer legally bound to your former spouse's current debts. Call all of the creditors who have been bothering you and alert them to this fact. In a perfect world, they would apologize for the inconvenience and never call you again. However, it may take awhile before such calls cease entirely. In addition to notifying the proper collectors, you should right a letter to them as well. That will help them to expedite their file updates.
Let me explain why I have a problem with this paragraph. If the debt is a joint debt, the fact of a divorce does not change the obligation. The parties divorced each other and not their creditors. If the debt is not a joint debt and the one sending the letter is not obligated on the debt, then the letter is just a waste of a stamp for most debts. Indiana has its Doctrine of Necessities but that doctrine is complicated enough that most creditors will not waste their time with it.

With the exception of that one paragraph, I would say it is a good column to read and put into practice. I did notice one solution unmentioned was a prenuptial or post-nuptial agreement.

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