Being involved in a divorce can be quite an unpleasant experience, especially if it happens late in life. There’s the emotional roller coaster of dealing with a failed relationship, the challenges of starting all over again and all the legal drama that comes with separation. But that could all turn out to be the least of your problems if your former partner decides to take out a hit on your finances. It happens to a great number of people, but by seeking the counsel of a Leadville divorce attorney, you could avoid such unfavorable circumstances.
Many people make the dangerous mistake of relegating money matters to the backseat during a divorce. Some do this due to the trust they have for their soon to be ex-spouse, others probably because of ignorance. Regardless of the reasons you may have, one of the costliest mistakes you could make during a divorce is ignoring the effects it could have on your finances. Divorce is capable of seriously hurting your credit, putting you on a slow but steady part to financial doom.
Fortunately, divorce on itself, whether nasty or not, does not have a direct effect on your credit rating. However, what causes problems is the unfortunate circumstances surrounding a divorce. Sometimes, while legal battles bordering on the divorce is fought out in court, one party may unintentionally end up spending a little too much on legal fees. Or your vengeful ex-spouse may decide to intentionally max out credit cards on joint accounts.
That being said, whether your divorce is on somewhat friendly terms or is marked by intense dislike for each other, it’s usually very important to protect your credit. To help you avoid such an unpleasant event in your financial life, we’ve put together some steps to help you protect your credit and financial future.
Cancel joint accounts
During a divorce, one of your first lines of action should be to take down any joints account you together with your spouse. If you leave a joint credit card account open, nothing is stopping your spouse from maxing them out on a shopping spree. Apart from the pain of repaying the credit balance, you also run the risk of having your interest rate increased.
The biggest problem comes when your credit card issuer sends a routine report of your credit balance to the credit bureau. A maxed out credit balance could greatly affect your credit score. About one-third of your credit score is based on how much of your available credit you are using. Any balance greater than 30 percent will almost certainly have a negative impact on your credit rating.
De-authorize your spouse’s access to your personal account
During the rosy days of a loving relationship, you may have added your spouse as an authorized user on your personal account. While this may not necessarily be a bad decision during the good days after divorce things could go awry real fast. Try as much as possible and as soon as possible to remove your spouse’s authorization from any account that is in your name.
As an authorized user, your spouse could incur as many charges as possible on your account but would not be legally obligated to pay them since the card is in your name. Of course, if the account was a credit card account, such actions would also have a significant effect on your credit score.
Avoid being a vengeful ex-spouse
Okay, let’s assume that it’s not your spouse that’s the vengeful one. It’s also not in your interest to go on a spending spree after divorce because you believe it’s your spouse that will be liable for the debts. Your spouse could get a law court to look at the spending and force you to take liability for the debt because of intentions. In any case, you might end up paying for expenses both you and your spouse incurred. So, during a divorce, it’s advisable to maintain your normal spending habits.
Notify creditors about your divorce
Immediately after you’ve gotten a divorce, you should immediately inform important creditors to forestall unauthorized charges that may be incurred by your spouse. You could do this by sending a certified letter to banks, credit card companies, and other lenders asking them to put your joint accounts on inactive status so new additional charges can be made. By doing this, you absolved yourself from the liability of any debt incurred from the date of writing the letter.
Consider freezing your credit files
It may seem like an excessive step, but if your spouse has a history or tendency of being vengeful, you might need to freeze your credit. Since your ex-spouse would most likely have access to your social security number and other vital information, it’s quite possible for him (or her) to open a new credit account on your name. When this happens, you ultimately become liable for the debt on the account until you’re able to prove that it was fraudulently created.
Don’t fight too much for the house
While it makes sense for you to fight for the house you raised kids and had fond memories, emotional attachments like that could bring problems your way. In today’s real estate market, a house could turn out to be much of a liability than an asset. If you’re keeping the house, your almost certainly keeping the debt that comes with it. So unless you’re quite sure the house is going to be an asset, you might want to consider letting go.
A popular and good way to settle things is usually to sell the house, split the proceeds and go different ways.
It is quite tough to think about your finances while juggling different emotions associated with a divorce, but it’s nonetheless very important. It’s also very vital to pay attention to your finances even while your married to make sure your partner isn’t making phony decisions. While we outrightly support trust between spouses, taking a little inventory of things once in a while wouldn’t hurt much. All in all, keep a close check on your credit during a divorce, keep things tight and stay financially safe.