Ways To Weather The Financial Storm That Is Divorce Attorneys
Whether before or after the papers are signed, economic hardship is all too familiar to many formerly married couples. A few financial steps can ease the burden during this difficult time.
Each year, 1 million Americans divorce. More than 80 percent of divorcing couples cite “debt and financial distress” as the primary factor in the dissolution of their marriages, according to an American Bar Association survey, and studies find that most families suffer a financial decline after divorce. By taking measures to protect credit, families can come enhance financial woes. Bills.com, a national consumer finance portal, encourages divorcing couples to take the following steps:
1. Accurately assess debts and liabilities.First, see yourself from your creditors’ perspective. Online (http://www.myfico.com) or by phone, you can request a “tri-merge” credit report ( summary from all three major credit reporting bureaus). Note all your existing shared and individual liabilities. Settle (or get a judgment) on how you’ll allocate these responsibilities.
2. Address the long-term plan with your home.If you own a home, the mortgage is likely your most significant monthly payment. Be certain you understand how you’ll resolve monthly mortgage payments, and how you’ll divide the home’s value – whether one partner buys out the other now, or the home is to be sold after children are grown.
3. Budget for payments.Create a detailed budget, based on your new income level, and use free cash flow to pay off debts. Most people find the most efficient way to pay off debts is to first pay off smaller bills –starting with under $100 – then pay off loans and unsecured debt, such as credit cards, beginning with the account with the highest interest rate.
4. Make sure your ex-spouse is making his or her payments.If possible, make provisions in the divorce settlement for reporting on resolution of significant debt. There are important implications for you personally if your spouse does not meet his/her end of the bargain on liabilities allocated through the divorce proceedings. Call all creditors for shared accounts (credit cards, gas cards, department store cards, phone cards, etc.). Close the accounts if you are not carrying balances or remove your name from jointly held accounts. Remember that for jointly held credit cards, and for any other debts incurred during the marriage in community property states, you have shared liability – and thereby share any potential negative credit rating impact. This means that if your spouse does not make payments after the divorce, it could come back to haunt you – and your credit rating. If you owe back taxes, be aware that the IRS does not have to honor a decision from a divorce judgment. Consult a tax expert to help with your divorce tax planning.
5. Focus on rehabilitating your credit and financial health.Begin a savings plan. Reinvest any proceeds or equity that come out of the divorce proceeding and be especially cognizant of building yourself a retirement fund for the future.
If you find yourself in trouble during this stressful time — in which you must make many financial decisions — seek help immediately from a reliable, professional debt resolution firm. Be sure to investigate the company you choose to assist you and seek out a company that operates for the consumer, which is markedly different from credit counseling, debt consolidation, and debt management firms.
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