Credit Harm & Divorce: The Overlooked Recoverable Injury

Posted on October 6, 2014


Credit Harm & Divorce: The Overlooked Recoverable Injury By Georg FinderThere are three major points in a divorce at which the client may experience economic loss caused by the actions of their spouse:

  1. Breach of fiduciary
  2. Violation of the Temporary Restraining Order
  3. Violation of the settlement agreement

These issues may apply to individual or joint financial accounts.

Lawyers routinely hear complaints from clients who have had their credit cards cancelled, are getting collection calls and letters, or are facing foreclosure. Some are filing for bankruptcy because they are experiencing loss of employment or a financial crisis due to eroded credit scores and negative remarks on their credit report.

However, family lawyers can now present an expert economic damage report, more efficiently and effectively, that will monetize a client’s credit reputation harm for recovery.

Since the Family Law Act of 1970 greatly expanded the topics addressed in divorce, more courts and arbitrators/mediators allow awards for credit reputation harm. Credit reputation injury occurs when negative remarks appear on a credit report that cause an individual or business to lose access to credit that was available prior to the report.

Credit reputation impairment involves:

  1. Increased out-of-pocket costs
  2. Loss of credit capacity
  3. Loss of credit expectancy

Impairment is caused by actions of the spouse that resulted in negative remarks appearing on the client’s credit report. In addition, a client may suffer financial harm when spousal negligence or willful behavior results in late payments or default on their joint credit obligations.

Adversely affecting credit reputation first received court recognition as a form of economic injury in 1912.

Currently, the three national credit report repositories are:

  • TransUnion
  • Experian
  • Equifax

Each provides subscriber reports only to subscribing businesses, and Consumer Disclosure reports, also known as the Free Credit Report, directly to the consumer.

Arguing for Credit Reputation Harm

Expect the opposing counsel to continue to use the “subjective” argument against credit injury measurement. The key to a successful argument for credit reputation damage that will maximize injury value, is to present a thorough analysis of the before and after picture of the injured party’s credit situation.

The best approach is to seek an expert opinion to support monetization of the harm. With more courts accepting credit reputation damage as a special injury, this “invisible” impairment can now become a sizable portion of an injured party’s damage award. The attorney’s recognition of injury to credit reputation, may be the difference between leaving the money on the table and getting it for the client.

Georg FinderGeorg Finder
Credit Damage Expert
(855) 879-6253