Divorce and Your Credit
Divorce proceedings may break your heart, but they also can break the bank. Unfortunately, one of the common side effects of divorce is damage to your credit score, which directly impacts your ability to get financing for a mortgage or car loan, among other things. However, there are some steps that you can take in order to avoid these credit pitfalls and get your credit score back on track.
Close Joint Accounts
Spouses often jointly share credit accounts, whether they are mortgages, car loans, or credit cards. All too often, one spouse is ordered to pay for a jointly held debt, but fails to do so. In that case, the other spouse is still financially responsible for the debt, even if the divorce decree ordered the first spouse to assume the payments on the debt. The bank or company that has lent you the money just wants payments to be made as agreed, no matter who makes the payments. You run the risk of being sued if the account is not paid, which can result in a judgment against you, the garnishment of your wages, and a corresponding drop in your credit score. The best way to avoid this scenario is to close all joint accounts possible, and/or be responsible for those joint debts yourself if you must maintain a joint account. As a result, you will know for sure that the account will get paid.
There is no doubt that divorces take a financial toll on all parties involved. As pointed out in a recent U.S. News article, a divorce involving a timesharing dispute can cost over $20,000, which can cause many individuals to fall behind in their regular bills and/or to take on additional debt in order to come up with the necessary cash. Too much debt can lower your credit score and make your previous lifestyle unrealistic. After a divorce, you should use marital assets to pay off debt for which you are responsible, if possible, create a budget for yourself, and stick to it. Attempting to maintain your previous lifestyle will only continue to strain your finances and hurt your credit.
Sell or Refinance Joint Assets
In some cases, spouses agree to sell a joint asset in order to pay off other debts or simply collect the proceeds from the sale to use for other purposes. This often happens with the marital home, which often has a mortgage on it. If one spouse insists on remaining in the home and not selling it, then he or she should have to refinance any loans on the home solely in his or her own name. This is the only way to end your financial responsibility for the loans and other liabilities that are tied to the home. If refinancing does not occur, your spouse eventually stops paying the mortgage payments, and the house goes into foreclosure, your credit will take as big of a hit as that of your spouse.
Advising You Throughout Your Divorce
Divorce is always a difficult and stressful undertaking, but it can become even more complicated when it impacts your credit score in a negative manner. In these situations, an experienced Florida divorce attorney can give you the legal and financial advice based on the facts and circumstances surrounding your divorce. Many times, you become so wrapped up in the emotional side of divorce that you fail to make the best financial decisions, which can really hurt your credit in the long run. Fortunately, we are here to help you make the best decisions for you and your family, and guide you through the critical steps involved in a divorce. Contact Vanessa L. Prieto Law Offices, LLC, today, and let us work help you work toward a successful resolution of your divorce.