CRITICAL FINANCIAL STEPS DURING A DIVORCE
Many of our clients have to file bankruptcy because of financial mistakes they made while going through divorce. In a divorce, things get more difficult –the income is cut and the expenses increase. Read on for ways to avoid getting into a financial mess while filing for divorce.
Protect Your Credit Score
It’s critical to close joint accounts and/or remove your ex as an authorized user on your accounts. If you leave joint accounts open, your ex might use the credit cards to “survive” and leave you to pay the debt. If you have a joint account, you and your ex are both liable for the full amount of the debt. If the amount of the debt in a joint account is nominal and you can afford to pay it off, ask the creditor to put the account in your name alone. If the balance is significant, discuss your options with your divorce attorney. Creditors do not care which party has agreed to pay a debt as part of a divorce—they only care that they get their money. Creditors can require that you pay a joint debt even if your ex agreed with you to pay it.
If you are joint on a car or home loan, try to refinance the loan into your name alone if you plan on keeping the car or staying in the home. If you are planning on allowing your ex to keep the car or home, your credit score is at risk if your ex does not pay the debt. See if your ex can get the loan refinanced in his or her name before the separation.
Avoid Debt as Support
Many times it is better to just file bankruptcy before the divorce so both you and your ex can get a fresh financial start. Your ex may try to get you to agree to pay certain debts as part of the divorce. If you agree to pay a certain debt, the bankruptcy court will consider the debt to your ex to be “support” and it would be non-dischargeable in bankruptcy. That means that you cannot get out of paying the debt. Be very careful about what you agree to do. If you are dealing with significant debts and going through a divorce, call New York bankruptcy lawyer, Laura Harris-Courage to discuss whether bankruptcy might be a good solution for you.
Make a Budget
After the divorce, you will be dealing with a different financial situation. Using your own income, make a budget. Don’t run up debts trying to maintain a lifestyle that you can no longer afford.
Houses commonly cause financial difficulties after a divorce. Generally, the net value of assets are split 50-50. You might be offered the house but have to release your interest in your spouse’s retirement. Before you take that deal, make sure you can afford the house. Too many spouses keep a home they cannot afford and then lose the house to foreclosure. Use your budget to decide if it makes sense to keep the house.
We’re happy to answer your questions about debts and finances during a divorce. Call our office for your free, confidential, no-obligation phone consultation