Ask Liz Weston

Dear Liz: The day before my son got married, he proudly had a long-term 800-plus FICO credit score. The day after he got married, his FICO score became 600. It seems his new wife had many outstanding major debts incurred before the marriage. They live in a non-community-property state. How can he rebuild his credit either with or without a divorce?

Answer: Unless your son filed for bankruptcy the day after his wedding, the scenario you describe is pretty much impossible.

Our credit reports don’t get merged or combined when we marry. And it’s highly unlikely that any of the debts his wife incurred before marriage would be added to his credit reports unless he agreed to be added as a joint account holder or an authorized user.

As a practical matter, of course, he’ll want to help his new wife address these debts, since they’ll affect the couple’s life together.

But he’s not legally responsible for them. Because she incurred these bills before the wedding, they’re her separate responsibility in every state — community-property states included.

An appointment with a marriage counselor might be in order if she actively concealed these debts from him. But they needn’t contact divorce attorneys to fix this problem.

They should probably make two more appointments, however: one with a legitimate credit counselor affiliated with the National Foundation for Consumer Credit (www.nfcc.org) and another with an experienced bankruptcy attorney. The counselor and the attorney together will provide a complete picture of her options.

By the way, just as there’s no such thing as a combined credit report, there’s also no such thing as a “long-term” credit score. Each score is a snapshot of your credit situation and changes as the underlying information in your credit reports changes — which is basically all the time.

Dear Liz: My spouse has extremely high credit card debt. All cards are in her name only. Where do I stand legally if she dies or we divorce? What can a person do about such uncontrollable abuse of credit cards? The interest alone is horrific, but she pays it.

Answer: If you live in a community property state and don’t have a prenuptial agreement, debts incurred during marriage are typically considered owed by both parties (even if there’s only one name on the credit card). Community property states include California, Arizona, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin.

In other states, debts incurred by one spouse are usually that spouse’s responsibility alone, unless the money was used to buy family necessities such as food or shelter. If you divorce, she probably would be responsible for these separate debts. If she dies, creditors could go after her separate property and may be able to go after her half of any jointly held property.

The rules vary enough by state that you’d be smart to consult an attorney about your potential liability.

Wherever you live, though, this debt is affecting your union and your future together. The money she’s paying in interest isn’t available for other purposes, such as saving for retirement or your children’s educations, plus it’s clearly causing tension between you. If you want your marriage to succeed, you should invest in sessions with a marriage counselor and a fee-only financial planner.

While it’s not actually true that money is the leading cause of divorce, finances are certainly a big source of tension in many relationships. Recessions put extra strain on those relationships, which is why the new book “In Good Times and Bad: Strengthening Your Relationship When the Going Gets Tough and the Money Gets Tight,” comes at just the right time.

Written by husband and wife team Gary and Melisa Neuman, the book has some wise words and gentle wisdom about how to help your relationship survive life’s setbacks. Among them:

Fight the problem, not each other. Tensions over money can cause people to lash out and blame each other. It’s understandable, but horribly counter-productive. To weather bad times, you need to come together as a team and work out solutions.

Let go of the past. Any therapist will tell you a relationship can’t improve if you keep throwing past mistakes in each other’s faces. But in this case, the past refers to your past financial life, whatever that looked like. Maybe you’ll never again make the kind of money you used to make, or live in as fancy a house as the one you lost to foreclosure. Life may have better things in store for you, such as a less-stressful job that allows you to spend more time with your family, or a smaller home that’s simpler to take care of. In any case, you can’t go back, and hanging on to the past will just make you miserable.

Commit to communicating. If talking about money leads to fighting, you’re likely to start avoiding the topic just to keep the peace. But silence leads to misunderstandings and isolation from each other. To keep the intimacy in your relationship, you need to talk about money, and continue talking. Some ground rules:

• Set aside 30 minutes to talk each week. Schedule a time when you’re not tired or distracted.
• Share your earliest memories about money and how money was handled in your household growing up. These revelations can help couples better understand how their partners view money.
• Acknowledge you’re not always right. Couples need to compromise and acknowledge each other’s needs and wants.
• Work together to define your top financial goals and draw up a budget to help you get there.
• Track and review your spending weekly to make sure you’re on track.

Dear Liz: My wife and I each had excellent credit when we married 10 years ago. We are now divorcing (amicably). Since we married, we have put everything in her name: two houses in succession, three cars, all car insurance and utilities. We refinanced our house in February with her name first.

I recently opened checking and savings accounts in my name only and had my paycheck deposited there instead of our joint account.

What steps should I take before a divorce decree to be sure I retain a great credit score?

Answer: To protect their credit, divorcing couples should make sure to close all joint credit accounts and transfer any balances to the partner who will be responsible for paying the obligation.

The same is true for mortgages and other loans that are in both names. Whenever possible, these debts should be refinanced in the responsible party’s name only.

All this should be done before the divorce is final. Otherwise, your ex can trash your credit — deliberately or not.

If your name is still on the mortgage, car loans or credit cards, your scores could plummet if she misses a payment. You would have little recourse because your creditors aren’t bound by your divorce agreement, even if it plainly requires her to stay up to date on these obligations.

Closing accounts and opening new ones can inflict temporary dings on your credit, but these pale in comparison to the damage done by a single skipped payment. If you want to keep that amicable vibe and your excellent scores, separate your credit accounts now.

Are you prepared to handle a job loss, divorce, serious illness, death of a spouse? A recent survey by AARP shows that most adults have already experienced one of these significant life events, and that it had a major impact on their finances.

The survey of 1,200 adults age 40-79 shows that women tend to feel the sting of these crises more acutely than men:

• 65% of women were significantly more likely to have experienced one of these life-changing events vs. 49% of men.
• 66% who experienced long-term job loss said it had a very significant impact on their finances vs. 49% of men.
• 46% said death of a spouse had a major impact on their finances vs. 17% of men.
• 54% of women vs. 32% of men said their emotional health suffered from job loss.

Overall, more than half (57%) of the 1,200 adults surveyed said they had already experienced a major life crisis such as a job loss (18 percent), divorce (29 percent), death of a spouse or life partner (10 percent), a serious illness or long-term disability (24 percent), or the illness or disability of a child (7 percent), AARP Financial Inc. and Boston Research Group found.

Other findings:

• Of those who experienced long-term job loss, 6 in 10 said that it had a very significant impact on their finances, and 47% of respondents who experienced a serious illness or long-term disability echoed the same sentiment.
• More than half of those surveyed (54%), said that it was hard to keep their emotions in check during a major life event, and 42% said that it was at least somewhat difficult to stay focused.
• More than half (51%) of those who had experienced job loss said they were at least somewhat unprepared to deal with the financial consequences, as were 44% who experienced the very serious illness or disability of a child; 42% who experienced the very serious illness or disability of a spouse; 35% who had experienced divorce; and 27% who had lost a spouse or life partner.

Getting help from AARP:

AARP’s online resource www.aarpfinancial.com/lifecrisis — offers steps to consider before, during and after experiencing a crisis.

Also, check out my columns for advice and tips on planning:

• Where to turn when you’re desperate

• Surviving life’s big money blows

• Don’t take your passwords to your grave

• You’re dead: Where’s your 401(k)?

• Why women face a retirement crisis

Dear Liz: After 25 years as a homemaker and mother, I was divorced. I had to find work, create an income and begin life over. I am now 65 and in very good health, with loving children and a small business. But I am in debt and have no savings for the future. I awake each day to find I have more debt. It’s not healthy debt that I could handle, but over-the-top debt that I will never be able to repay. I acknowledge that I have a Cinderella princess mentality, thinking a prince will come along to rescue me, and that I’ve lived an upper-middle-class lifestyle that’s beyond my means. I have done my emotional work in overcoming the idea that I’m a victim and thus not responsible for my situation. But I still can’t act. My children do not know of my immediate disaster nor do my clients. I feel frozen and unable to reconcile myself to the inevitable, disrupting their lives and their image of me. What now?

Answer: You act.

Emotional work is all fine and good, but it’s pretty useless if you’re not using your insights to change the way you behave.

And, as you intimated, you’re behaving like a child. Children can believe in fairy tales and last-minute rescues, but grown-ups take charge of their own lives.

This won’t be fun. If you truly can’t repay this debt, you may end up filing bankruptcy or negotiating settlements with your creditors. You may have to move and live a more basic lifestyle.

But every day you delay, you’re adding to the pile of debt you owe. And you already have two things–good health and loving kids–that many rich people would trade their fortunes to achieve. Keep that in mind in the coming difficult days.

Dear Liz: After 25 years as a homemaker and mother, I was divorced. I had to find work, create an income and begin life over. I am now 65 and in very good health, with loving children and a small business. But I am in debt and have no savings for the future. I awake each day to find I have more debt. It’s not healthy debt that I could handle, but over-the-top debt that I will never be able to repay. I acknowledge that I have a Cinderella princess mentality, thinking a prince will come along to rescue me, and that I’ve lived an upper-middle-class lifestyle that’s beyond my means. I have done my emotional work in overcoming the idea that I’m a victim and thus not responsible for my situation. But I still can’t act. My children do not know of my immediate disaster nor do my clients.

I feel frozen and unable to reconcile myself to the inevitable, disrupting their lives and their image of me. What now?

Answer: You act.

Emotional work is all fine and good, but it’s pretty useless if you’re not using your insights to change the way you behave.

And, as you intimated, you’re behaving like a child. Children can believe in fairy tales and last-minute rescues, but grown-ups take charge of their own lives.

This won’t be fun. If you truly can’t repay this debt, you may end up filing bankruptcy or negotiating settlements with your creditors. You may have to move and live a more basic lifestyle.

But every day you delay, you’re adding to the pile of debt you owe. And you already have two things–good health and loving kids–that many rich people would trade their fortunes to achieve. Keep that in mind in the coming difficult days.

Dear Liz: My husband was married and owned a home with his first wife. In the divorce, she got the house with the stipulation that he would receive one half of the $25,000 down payment when it was sold. She defaulted on the mortgage, however. The lender sold the house at auction and then came after my husband for the amount that was still owed. The divorce papers had stated he would not be liable for such a debt. My husband attempted to sue her for the $9,000 he paid the lender plus the $12,500 he was promised but she filed for bankruptcy and his claim was one of the debts that was discharged. I’ve done research on the Internet and it seems like his debt shouldn’t have been erased. Do you think we have a case?

Answer: It depends.

If your husband’s ex filed her bankruptcy case before Oct. 17, 2006, when the new bankruptcy reform law took place, then her debt to him could legally be erased, said Leon Bayer, a Los Angeles bankruptcy attorney.

The new law, by contrast, says that a debt created by a divorce agreement isn’t dischargeable in Chapter 7 bankruptcy liquidation, although it may be erased in a Chapter 13 repayment plan.

If the debt was incorrectly discharged, your husband would be able to pursue his former spouse for the $12,500, Bayer said. In addition, he could sue her for the $9,000 he paid to the lender if the divorce court required the ex-wife to hold him harmless from that debt, as your letter seems to indicate.

By the way, there is a chance that the lender shouldn’t have been able to dun your husband for the $9,000 debt. Several states, including California, have “anti-deficiency” laws that prevent mortgage lenders from trying to collect such debts if the loan in question was a “purchase money mortgage”–in other words, if the loan was used to buy the property. If the loan was subsequently refinanced, though, anti-deficiency laws typically don’t apply.

If you still think your husband might have a case, Bayer recommends contacting a local attorney for help.