Divorce and Your Credit
According to the Americans for Divorce Reform, approximately 38% of all marriages in the United States end in divorce. With divorce comes anger and cutting emotions that must be dealt with, pushing issues including finances to the side. Just as there are practical financial matters that must be addressed when couples marry, the same must occur when couples divorce. This article will discuss the necessary financial steps divorcing couples must take in order to move forward (financially speaking) as individuals.
While thinking about money may be the last thing on one's mind during the initial stages of a divorce, it is extremely important to figure out both a short and long-term financial plan as quickly as possible. Despite the heavy emotions that can occur with the division of everything monetary, having financial stability post divorce will save time and added stress.
One of the first tasks at hand is to close all accounts that have both your ex's name and your name on it. Doing so will eliminate the possibility of blame or further stress that can occur if fund are mismanaged. Nor do you want to accrue any debt during the divorce process.
It is also wise to get a copy of your credit report to see what credit is still open and whose name it is in. This will give you a bird's eye view of how much debt there actually is that will need to be divided up during the divorce process.
Open up an individual account in your name only. This means go out and open a bank account and get a credit card. While this may seem counter-productive at the time, in the long run, it will save you time and frustration, especially if you have never established credit as an individual before you were married.
According to financial educators, if you never established financial credit prior to being married, it is better to establish it while you are going through the divorce process and are still married as you have a tangible credit history. If you don't, you will have a much harder time trying to do it once you are divorced and now have no credit.
Make sure to keep all assets and debts that you had prior to marriage separate as these are yours to take with you when the divorce is final. This means that if you had a student loan that you were paying prior to your marriage, you will take that loan with you once your marriage has ended. Same thing with assets; whatever assets you brought with you to the marriage, you take with you in the end. Keep in mind however, you may have to proof of purchase.
If there is ever a question about who owns the house you shared during your marriage, you should sell it and split the profit. This means that if you really want the house, you need to make sure that you will be able to afford to keep it. Never give up something that could cost you in the long run (like your retirement money) just to keep the house. It would be better to sell it, take the money and start your life brand new somewhere else. Besides, the money that you get selling the house will make a great down payment on a new one.
Another important step to consider is changing all the beneficiaries on your personal documents. These documents would include your will, any trusts you have set up, your IRA, retirement funds and life insurance. You may not want your ex to be the sole beneficiary of your assets, should something happen to you. A good idea is to put it everything your children's names if applicable. If not, consider donating everything to charity or give it to your family.
Getting a divorce is never a pleasant experience to go through, let alone having to think about the financial end of things. However, if you take the time to deal with the financial aspects quickly and early on in your divorce, it will save time, energy, and a whole lot of sanity.
