7 Ways to Lower the Cost of Divorce

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As a newlywed, the very last thing on your mind is probably getting divorced. But, unfortunately, divorce is something you may encounter — there were over 813,000 divorces in 2014 alone, according to the latest CDC data, compared to 2.1 million new marriages.

The cost of getting divorced can be just as expensive as getting married. Some estimate the legal fees alone can cost thousands of dollars, not to mention other costs that may be involved in changing your life post-divorce.

The difference is, when you get married you likely had time to prepare your finances. This may not always be the case when you get ready to get divorced.

So, what can you do if you can’t afford to get divorced? Here are some options that may be able to help lower the high cost of divorce.

Shop around for the right attorney

Brette Hankin, a business development manager for S&T Communications in Colby, Kan., says she visited several divorce attorneys to find one that was within her price range.

“The first lawyer I talked to said the retainer fee would be $10,000,” she says. “There was no way I could afford that.”

Eventually, Hankin visited other attorneys in her community and was able to find one who was more affordable.

“The lawyer I chose had a $5,000 retainer fee and was willing to return whatever money was not used for my case,” she says.

Ask friends and family for referrals to good attorneys in your area, or see if your state’s bar association has a way to search for attorneys specializing in divorce/family law.

Work out a “limited scope” arrangement or a payment plan

To help clients who may not be able to pay for their entire legal fees up front, some attorneys may also be willing to take payment plans, or work in a limited scope. Limited scope means they only handle certain parts of your case and you can handle the others.

“In cases where a client cannot afford traditional representation, I will sometimes represent a client in what is referred to as limited scope representation,” says Darlene Wanger, Esq., an attorney based in Los Angeles. “This means that I could represent a client for a single hearing, and then I am no longer the attorney of record.”

To cut costs even more, Wanger says she sometimes acts behind the scenes as a consulting attorney, helping clients fill out paperwork and working through the process without appearing in court.

“Never appearing in court can save a very large expense,” Wanger says.

If you still feel sticker shock at the cost of your legal fees, ask your attorney if you can work out a payment plan. This can help relieve some of the pressure to pay their fees all at once.

Reduce your filing fees

If you’re the spouse filing the divorce petition, ask about the filing fee with your local courthouse. The fee for filing a divorce petition varies based on the state and county in which you live and file your divorce. Filing fees can vary from $70 in Wyoming to $435 in California.

For simple divorces, without children or a large amount of property, you can usually fill out the petition yourself. This can save you from paying attorney fees.

Many individuals who are unable to afford a divorce don’t realize that they can get the divorce petition filing fee waived as well. A judge will review a written affidavit stating your economic hardship so the filing fee can be waived.

Keep things amicable (if possible)

When people think that they can’t afford to get divorced, it’s usually because they’ve heard about long, drawn-out court battles that cost thousands. But if you work with your spouse as much as possible, you can save a lot of money on attorney fees and court costs.

For example, after the filing of a divorce petition, the responding spouse will generally file an answer, even if they agree with everything stated in the petition.

While this can speed up the divorce process, it will cost more money. Any time an answer is filed with the court, it is subject to another filing fee. You could apply for the fee to be waived again, or if you and your spouse are in agreement, the answer could be written as a formality but not filed with the court.

Filing a joint petition for divorce can also save money as neither spouse would have to be served by a sheriff or certified mail.

Get divorced for free

Lizzie Lau, a 47-year-old travel blogger, used as many resources as she could to help her save money during her divorce. She was able to get divorced for free in California, the state with the highest filing fee.

“Initially, I assumed I would have to pay several hundred dollars in filing fees even though I had no income and no support,” Lau says. “But I went to the courthouse and talked to them. I was told that based on my income the fee would be waived, and as long as we didn’t go to court, it would be free. Although, they told me it was pretty rare for a divorce to go through without going to court. I assured them that I was going to be the exception to the rule.”

Lau got the filing fee waived for her petition. Plus, she and her spouse worked together to avoid other costs. Because they were in agreement, he didn’t file a response, and they were able to get divorced without appearing in court, saving them from paying for attorneys and other court costs.

File a pro se divorce

Part of Lau’s strategy included filling out her own legal paperwork and representing herself for her divorce case. This is called a pro se divorce, meaning you represent yourself without an attorney.

This is not a strategy that would work well for divorce cases involving disputes over child custody or property and asset division.

There are a wealth of resources online that can assist people with filing pro se divorces by explaining things in common language.

Prepare for life after divorce

One of the other overlooked costs of getting divorced is the cost to set up a new household. In Hankin’s case, her ex-husband kept the family home while she moved to an apartment.

“He offered to let me stay in the family home, but I couldn’t afford the house payment,” she says. “Instead I got an income-based apartment.”

In other cases, assets may have to be sold if neither party can afford to keep them. Hankin says she got financial help from her parents and did her best to save money and live frugally.

“You don’t think about the costs of setting up a new household until you have to do it,” Hankin says. “Getting pots and pans, furniture, restocking your pantry. All of those things you never think about. We were married for 19 years before we got divorced.”

Hankin shopped at garage sales to save as much as possible. She also got a second job and cashed in her retirement savings. “I felt that it was my only option,” she says. “Now I’m starting from scratch to save for retirement again.”

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21% of Divorcées Cite Money as the Cause of Their Divorce, MagnifyMoney Survey Shows

In MagnifyMoney’s 2017 Divorce and Debt Survey, we polled a national sample of 500 divorced U.S. adults to understand how money played into the end of their relationship.

Here are our key findings:

AMONG ALL SURVEY RESPONDENTS

More money = more problems

Among all respondents, 21% cited money as the cause of their divorce.

In fact, the more money a respondent earned, they more likely they were to cite money as the cause of their divorce.

Among people who earned $100,000 or more, 33% cited money as the cause of their divorce.

By contrast, only 25% of people who earned $50,000 to $99,999 cited money as the cause of their divorce. And the lowest income-earners, those earning $50,000 and under, were the least likely to say money was the cause of their divorce at just 18%.

Money might cause more stress for younger couples

While rates of divorce rose along with the amount of a couple’s’ earnings, the opposite seemed to be true when it came to age. Younger couples reported that financial issues drove them to divorce, while the rate went down for older couples.

  • Among 25-44 year olds: 24% cited money as the cause of their divorce
  • Among 45-64 year olds: 20% cited money as the cause of their divorce
  • Among those 65 and over: 18% cited money as the cause of their divorce

AMONG SURVEY RESPONDENTS WHO CITED MONEY AS THE REASON FOR THEIR DIVORCE…

Divorce often led to debt 

Between legal fees, paying for your own expenses instead of sharing the burden with a partner, and other costs that come up when you choose to end a marriage, divorce gets expensive. For couples who already faced financial problems, the added expense often meant getting into even more debt.

Well over half (59%) of respondents who cited money as the cause of their divorce also said they went into debt because of their divorce. And a whopping 60% said their credit score fell after the divorce. By comparison, just 36% of the total survey group said they went into debt because their divorce, and only 37% said their credit score suffered.

Among those who cited money as the cause of their divorce…

  • 2% of respondents said they got away with $500 or less in debt.
  • 13% said they racked up debts of $500 to $4,999.
  • 14% said they took on between $10,000 and $19,999 worth of debt
  • 23% said they owed $20,000 or more

Among all survey respondents…

  • 2% were less than $500 in debt
  • 8% were $500 to $4,999 in debt
  • 6% were $5,000 to $9,999 in debt
  • 8% were $10,000 to $19,999 in debt
  • 12% were $20,000 or more in debt

Overspending was the biggest source of tension

Nearly one-third (30%) of those who said that money was the reason for their divorce also said overspending was the most common problem they faced. Overspending can easily add up to carrying credit balances when the cash runs out — and in fact, credit card debt was the second most common money problem these respondents cited.

Bad credit was also a problem, along with other types of debt like medical and student loan debt. Most financial issues seemed to stem from bad cash flow habits, however. Only 3% said bad investments caused trouble within their relationships.

Financial infidelity was rampant

When overspending and debt become issues within a marriage, partners may feel compelled to hide mistakes and bad money habits from each other. In fact, 56% of survey respondents who said money was the reason for their divorce also admitted that they or their spouse lied about money or hid information from the other person. By comparison, just 33% of all divorcees surveyed said they lied or were lied to about money during their marriage.

Among the survey respondents who cited money as the cause of divorce…

  • 37% said their spouse lied to them about money
  • 8% said they lied to their spouse about money
  • 10% reported that they both lied to each other.

Among all survey respondents…

  • 24% said they their spouse lied about money
  • 3% said they lied to their spouse about money
  • 5% said they both lied about money

Most would rather keep separate bank accounts

With financial stress causing trouble in relationships, it’s not too surprising that 57% of people who cited money as the cause of their divorce said married couples should maintain separate bank accounts. Forty-three percent maintained that within a marriage, couples should keep joint accounts — even though their marriages ended in divorce.

Most failed to keep a budget

A whopping 70% of respondents who said their marriages ended due to money said they didn’t stick to a budget during their marriage. A budget is such a simple tool, but one that’s essential to tracking cash flow and understanding where money comes from — and goes.

Most don’t believe prenups are necessary


Dealing with divorce is never easy, especially when financial problems caused the separation and continue to plague couples after the paperwork is signed thanks to new debts.

Still, 58% of survey respondents whose marriage ended in divorce due to money said they didn’t think couples should get a prenuptial agreement before tying the knot.

How to deal with your finances after divorce

Here are a few tips to help you get back on your feet, financially speaking, once your divorce is finalized:

Recognize your bad money habits. Money issues can negatively impact a relationship, and even cause it to end. But they can hurt you as an individual, too.

Create a budget. Remember, most people whose marriage ended due to financial stresses didn’t keep a budget during their relationship. Doing so now will help you stay on top of your money and know exactly where it goes. That will allow you to make better spending decisions and help prevent taking on even more debt.

Don’t make major money decisions right away. If you just finalized your divorce, you may feel like you need to make major changes or choices right away. But take a moment to slow down and give yourself time to heal. You shouldn’t make emotional decisions with your money — and going through a divorce is an emotional time. Wait until you can think more clearly and rationally before doing anything with your assets, cash, or career.

Money should not be your therapy. Because divorce can do a number on you, mentally and emotionally, you may need help with the healing process. But that does not mean retail therapy! It’s tempting to spend on material things in an effort to make yourself feel better, but any happiness you feel from shopping sprees is temporary and fleeting. It can also leave you into even more debt. Put away your credit cards, stick to cash, and use your budget to guide you.

Work to rebuild your credit. 60% of people reported their divorce hurt their credit. If your credit suffered too, take steps to rebuild it. Pay down debts, make all payments on time and in full, and don’t continue to carry balances on credit cards. Try to avoid taking out too many new loans or lines of credit all at once.

You should also work through this checklist of important actions to take after your divorce:

  • Update your beneficiary information on your accounts and insurance policies.
  • Update your will and estate plan.
  • Make sure all of your assets are in your name only and no longer jointly held.
  • Cancel accounts or services you held jointly, like utilities or cable. Open new accounts for you in your name.
  • Allocate a line item for savings in your budget. You want to start rebuilding your own cash reserves. Set an automatic monthly transfer from your checking to your savings so you don’t forget.
  • Close joint credit cards and get a new line of credit in your name.
  • If you have children, keep careful records of expenses for them that you plan to split with your ex, in case of disagreements. Ideally, make sure your divorce agreement includes an explanation of how child care will be split and who is responsible for what, financially.
  • Think about whether you need to hire new financial professionals to help you. You may want to find a new financial planner and certified public accountant. You’ll want to update your financial plan to reflect the fact that you’re no longer married.

Survey methodology: 500 U.S. adults who reported they were in a marriage that ended in divorce via Google Surveys from Feb. 2 to 4, 2017.

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A Divorced Dad’s Guide to Keeping Lawyer’s Bills Low

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Hey you, Mr. Middle-Aged Man sitting in the third row wearing the Titleist hat and regretting not putting on the sunscreen yesterday while you were spraying golf balls all over your local municipal golf course. I’ve seen that look before. Hell, I wore it for months myself. You’re getting divorced and the ensuing custody battle has drained your checking account quicker than a cracked pipe at SeaWorld. Sit back and take it from someone who lived through it first-hand — representation is costly.

It’s often the first question people think about when considering a divorce – how much will it cost? Some attorneys don’t schedule a lunch appointment without finding someone to bill for it. To them, your best interest only comes in the form of currency. Understandably, attorneys expect payment for their services, but, in my own divorce experience, how much you’re willing to pay can dictate your “best” interest. Sob stories can just get you voicemail next time you call to schedule a meeting.

I can only speak from the perspective of a divorcing dad doing all he can to get 50/50 custody (which can be very difficult when courts are involved and you are male), but here are my tips for handling your divorce without losing an arm and a leg paying attorney fees.

1. Accept That Your Attorney & Your Ex’s Attorney May Be Friends

Attorneys generally have a “professional” respect among each other. They may talk bad about the opposing attorney to your face, but there is a good chance after a little digging around on the internet you are going to see any two attorneys hobnobbing at some bar association banquet.

2. Limit the Phone Calls

Whether your attorney is friendly with opposing counsel or not, it’s still a good idea to give your attorney ZERO reason to contact the other attorney unnecessarily. Remember, your attorney will likely bill you for that 20-minute phone call.

3. Email Only When Absolutely Necessary

Speaking of it, unless you catch your ex holding your child hostage in a war zone, limit email communications, even with your own attorney. Instead, keep notes and send a weekly or even monthly summary. Emailing your attorney every time you get a bright idea can to cost you $20-$30 a pop. I don’t care if you are laying out a defense strategy that will be taught at the Harvard Law Review or telling your attorney “Thank You” for doing their job. Flattery may get you nowhere but further in debt. (Been there, done that and have the T-shirt to prove it!) And hunt around the internet. There are many third-party apps that will keeps track of all the crucial information for you at a fraction of the cost of having your attorney do this for you (or even for free).

4. Understand All the Costs of Mediation Before Agreeing to It

Depending on the laws in your state or country, mediation can get pretty pricey. In my experience, mediation is the gift that keeps on giving for attorneys. You will likely wind up paying your attorney their hourly rate PLUS half the cost of the mediator (usually another attorney). I advocate taking your chances in court — again you are dealing with two people that make more money the longer you sit in mediation. Take it from me and the millions of other guys I suspect spent a fortune getting the same exact thing they would have going in front of the bench.

5. Know That Talking to Your Ex Through the Lawyer Can Cost You

If your divorce is about as amicable as an Israeli-Palestine peace agreement, you can bet your lawyer is eventually going to suggest/demand that any communication with your soon-to-be ex go through them. But, remember pal, ANY communications with your lawyer can cost money, so try to tune out potential arguments with your ex and, even if you are in the right about an issue, just document it and maybe it will pay off in the long run. (Remember, too, the urge to call your ex every nasty name in the book may be tempting, but in today’s digital age screen images of emails and text messages are hard to explain away, so refrain from sending profanities your ex’s way.)

I stress again do not get caught in the trap of communicating with the ex through a lawyer. Fellow dad, I get it. I’ve been there and I’ve got the scars to prove it. This new world of going through a divorce involves calculated moves and you can forget common sense.

6. Accept That Custody Is Going to Be a Costly Battle

If you are just dealing with a divorce with no kids, congratulations, you have saved yourself a few thousand dollars immediately. Unfortunately, for many of us, that isn’t the case. You can kick, scream, write a daily letter to the editor of your local newspaper and you still may not wind up with, at the minimum, 50/50 custody. The family law system does not tend to favor a father and your lawyer likely knows this. I’m not saying accept less custody than you are seeking (I didn’t), but be prepared for many empty meetings with your attorney telling you to take the deal you are offered. Good luck is my advice, again I’m not telling you to punt, but be forewarned. Unless your pockets are very deep, this could potentially come up fruitless.

[Editor’s Note: Remember, divorce can wreak havoc on your finances and your credit. You can monitor any joint accounts as you go through the process by pulling your credit reports for free each year and viewing your free credit report summary, updated each month, on Credit.com.]

 This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: PeopleImages

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It’s Divorce Season: Here’s How to Keep Good Credit While Splitting

No one ever said divorce would be easy, especially when it comes to your finances. But if you’re contemplating a break, have hired an attorney or have just been served papers, managing your credit should be of utmost importance to you. Your finances, like your personal situation, are going to change, and you’ll need to protect them to secure your financial future.

New research from two University of Washington sociologists shows that divorce-filing rates peak in August, right after summer vacations. Their research was based on analysis of divorce filings in Washington state between 2001 and 2015. To help you get through this uncertain time, we reached out for some advice to John C. Heath, a credit expert and consumer attorney for Lexington Law, which is affiliated with Credit.com. Here are some of the things he said to keep in mind credit-wise as your case wends its way through divorce court.

1. Pull Your Credit Reports

“You’ll want to pull your credit reports and take a look at what’s on them,” says Heath, because there’s a chance you may have joint credit accounts with your soon-to-be ex-spouse that you aren’t aware of, or worse, you’ve been put on accounts without your spouse telling you. If either of those are the case, you’ll want to make sure to address it, whether that means putting the account on ice until things are settled, deciding on who will take what responsibility or having your ex-spouse or yourself removed from the account.

You’ll also want to check your report for any errors, as these can sometimes lower your score, making it hard to secure new lines of credit. (You can learn more about disputing errors on your credit report here and view a summary of your credit report, updated monthly, for free on Credit.com.)

2. Avoid Taking Out New Lines of Credit

“One other thing you won’t want to do is take out any additional credit,” Heath says, because it may wind up affecting your soon-to-be ex-spouse’s credit file. For instance, if you’ve co-signed on a loan for your spouse and decide to apply for a travel rewards card, you could overextend your finances, making it harder to pay for the loan. If you fall behind on payments, or worse still, default, this could impact your spouse’s credit. Taking on more debt than you can handle could also exacerbate an already tense situation where you’re juggling attorneys’ bills with daily expenses.

3. Draft a Budget

Tough as it is, accepting and adjusting to your new financial reality is a must if you want to move forward, says Heath. “You’re going to be entering a time where, if you had a joint account, that money is no longer available to you,” he says.

Your situation may change in other ways as well. For this reason, it’s important to have your own funds set aside, so you can pay bills on time, and in full, without worrying. With things at home changing, you’ll also want to make sure you’re able to afford what you need to get by, be it a car, a home, student loans or anything else.

With your credit in solid shape, you’ll be able to finance an auto loan, a mortgage or whatever other type of loan is necessary for starting your new life.

Image: stevecoleimages

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3 Smart Money Moves to Make Before You Get Divorced

divorce-wide

Ending your marriage is both difficult and life-changing. There are many things to think about, from deciding where you’re going to live to learning to deal with the realities of being newly single.

What you may not think about is how best to protect your credit from the adverse effects of a divorce.

In my two-plus decades in the credit environment I’ve heard countless disaster stories about how divorce has ruined both spouses’ credit reports and scores. If you wait until after your divorce is final to take stock of your credit health, it may be too late to undo the damage.

There are a few steps everyone should take to protect their credit before they get divorced. This strategy will help limit your credit’s exposure to your divorce will almost always allow you to re-enter the world of being single with the cleanest credit report possible.

Here’s how…

Close joint credit card accounts

Divorce may allow you to sever ties with your spouse, but you could still be on the hook for shared credit debt. Even if a court assigns payment responsibility to one spouse or the other, your creditors do not have to recognize the assignment because they were not a party to the divorce settlement agreement.  That means any joint credit cards will still be the responsibility of both spouses even after your divorce.

Any use or abuse of the joint credit cards will blow back and harm the credit reports and scores of both spouses. It’s because of this potential harm that all joint credit cards should be closed prior to your divorce. Normally this would be poor advice because of the potential damage you can cause to your credit scores by doing so, but the downside of continued liability on a credit card that isn’t being paid is even more problematic.

Optional: Before you close any account, it’s a good idea to open a few new cards in your name. Once you start closing credit cards you’re going to lose the buying power that comes with plastic and you are going to need cards to use in their place. Opening a few cards in your name prior to closing your joint credit cards will allow you to continue functioning as efficiently as possible during and then after your divorce.

Sell or refinance your joint assets (house, car, etc.)

If you have joint loans secured by either your home or your car then you will still have liability for the debt even after your divorce.  This is problematic for two reasons. First, if your ex-spouse is assigned payment responsibility in your divorce settlement and he or she starts missing payments then your credit reports and scores will suffer. Second, even if the accounts are being paid on time, the large amount of debt will harm your debt-to-income ratios, which are important metrics considered by lenders when determining how much you can qualify for when you apply for loans.

You will not be able to convince your lenders to simply take your name off of joint loans, just like you won’t be able to convince your credit card issuers to remove your name from joint card accounts. That means the only way to separate yourself from the joint loan is to either sell the house or car, refinance it into your name alone, or buy the home or car from your spouse. Of course, some of these options may not be feasible.

You may not be able to afford to buy or refinance the loan into your name alone. You may not have a job or you may not be able to qualify for the loan amount needed to do so. And, you may simply not want the house or the car for whatever reason. In these cases the best move is to simply sell the house or the car, divide the proceeds with your soon-to-be ex-spouse and move on with your life.

Protect your credit from identity theft

Identity theft continues to be one of the fastest growing white collar crimes in the United States. And because your spouse likely has access to your personal information, he or she could easily apply for credit in your name during or after your divorce. This is not unheard of, especially if the divorce becomes contentious.

Thankfully, there three ways you can minimize the risk of this type of fraud, each with varying difficulty and expenses.

For free: You can check your credit reports once every 12 months at annualcreditreport.com at no cost. But this once-a-year checkups are hardly sufficient when you’re trying to protect your credit reports from fraud. To keep a closer eye on your accounts, sign up for a site like CreditKarma.com, which will ping you anytime there’s new activity on your account.

On the expensive side: There are costly credit monitoring services that you can buy that will passively monitor all three of your credit reports for changes that could be indicative of fraud and alert you via email if there are any potential problems. You’ll be paying roughly $15 per month in perpetuity for those tri-bureau monitoring subscriptions.

The best low-cost option: The best, most cost-effective option is to place a security freeze on your three credit reports. That essentially removes them from circulation until you choose to make them available again. It also prevents anyone from opening new credit under your name. The security freeze, or credit freeze, is not free but the cost is a fraction of credit monitoring subscriptions. The cost is different state by state but it is usually less than $30 to place the freeze on all three of your credit reports and in some states it’s less than $10. The freeze prevents any disclosure of your credit reports to new lenders until you’ve given permission to the credit bureaus to provide them.

The post 3 Smart Money Moves to Make Before You Get Divorced appeared first on MagnifyMoney.

Does Getting a Divorce Hurt Your Credit?

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Getting divorced can come with plenty of heartache, paperwork, and even financial burdens. But one of those struggles does not include a dip in your credit score just because you signed divorce papers.

“The act of getting a divorce does not have a direct impact on your credit,” Bruce McClary, vice president of communications for the National Foundation for Credit Counseling, said in an email.

But that doesn’t mean getting divorced can’t affect your credit in some way.

“The more shared debt there is in a marriage, the greater the potential for some problems to arise if the relationship ends in a divorce,” McClary said.

So, the legal act of getting a divorce may not directly affect your credit, but what comes after may cause your credit to take a hit, depending on how your shared finances are dealt with.

What’s in Your Divorce Decree?

When a couple separates, the court will divide the financial responsibilities (including debts) in a divorce decree.

“Should the court rule that one party is responsible for repayment of the debt, it may not resolve all of the issues that could cause collateral damage on the other person’s credit report,” McClary said. “The divorce decree will not alter the original loan or credit card agreement, so any missed payments will hurt both people equally.”

And this can go beyond credit card debt.

“If you are ordered to pay child support and fail to do so, a judgment could be entered against you listing the amount you owe,” John C. Heath, credit expert and attorney with Lexington Law, a Credit.com partner, said in an email. “These obligations can be reported on your credit report.”

It’s also important to note that separating shared accounts is not part of a divorce decree — this is your responsibility.

“A joint credit card agreement only recognizes an equal responsibility to repay an entire balance,” McClary said. “Such a contract does not determine how the responsibility is divided proportionally based on how much each person is charging. That is a matter to be decided between the two people who share the account.”

Managing Your Finances Post-Divorce

“You need to pay your financial obligations in a timely manner,” Heath said. “If you have joint obligations with your partner, you will want to make sure these are paid in a timely manner too.”

McClary said it helps to give each account holder “identical copies of all original loan documents and cardholder agreements” so everyone starts out on the same page.

“Monitor your account activity regularly and keep the lines of communication open,” McClary said. “The more transparency there is between account holders, the easier it is to avoid trouble before it becomes serious enough to cause credit damage.”

And Heath warned against taking your stress out on your credit cards.

“You do not want to let your credit accounts get away from you,” Heath said. “Divorce can be a very emotional process and some turn to ‘retail therapy’ to feel better.”

What to Do if Your Ex Doesn’t Do Their Part

“Be prepared to use emergency savings to maintain shared debt payments if the other person stops contributing their portion,” McClary advised.

And, if they don’t start paying what they’re supposed to, you aren’t entirely stuck.

“The only recourse [to missed payments] is that the person determined to be responsible for repayment by the court can be sued by the other if they fail to pay as agreed,” McClary said.

McClary also said it’s important to remember that this “can be a lengthy process that may not resolve all of the issues, especially the initial drop in the credit score and any resulting collateral damage.”

Monitoring Your Credit

McClary recommended informing the three major credit reporting agencies of your divorce and the debt repayment plans put into place. He said, “the more they know beforehand, the more they may be able to help find ways to help avoid financial pitfalls related to the divorce.”

In addition to this, it’s also important to keep an eye on your credit throughout the process. To do this, you can get your free annual credit reports from AnnualCreditReport.com as well as see two of your credit scores for free, updated monthly, on Credit.com.

If your credit does take a hit as a result of a divorce, you may still be able to improve your credit scores by disputing any errors on your credit reports, paying down high credit card balances and limiting new credit inquiries.

[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

More on Credit Reports & Credit Scores:

Image: AndreyPopov

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I’m Divorced, So Why Is My Spouse Still on My Credit Report?

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In the midst of your divorce, you’ve probably discussed separating your assets, but you might be less inclined to talk about who’s going to take responsibility for shared debts.

Most courts will divide up responsibilities for these during a divorce decree, giving one individual the ownership of each debt.

However, “the decree does not change the contractual relationship that you or your spouse may have with the creditor because the creditor is not a party to your divorce,” John C. Heath, credit expert and attorney for Lexington Law, a Credit.com partner, said.

That means that while only one of you may now be legally responsible for paying the debt, the other person’s name is still attached to it unless you let the creditor know to remove it. This could be why you’re still seeing your former spouse on your credit report.

How Shared Accounts Get Separated

Rules on how to divide joint accounts vary by state, but most places consider debts acquired during the marriage as shared property. It may be a sore subject, but it’s important to make dividing up your debts a priority.

Contact your financial institutions and close or separate all shared accounts, including credit cards, home loans and mortgages.

If you don’t, you and your former spouse will continue to be tied together financially. And if an ex-spouse runs up credit card balances and fails to pay or falls behind on a mortgage that still has your name on it, the negative marks will show up on both of your credit reports.

After closing out all joint credit cards, you can ask each financial institution to re-issue you a card in your name only. You can also refinance joint installment loans such as auto and home loans.

“Be diligent in refinancing debt or selling an asset that has debt against it, and in making certain that any assets get retitled,” Rebecca Zung, Esq. Marital and Family Law attorney in Naples, Florida, said.

It could be better to make these decisions between the two of you instead of letting a third party determine your financial future.

“You can agree to divide debts and account responsibilities and then take appropriate steps to remove the non-obligated spouse from divided joint accounts,” Heath said. “You are a better decision maker than a judge who may glance at your case prior to making a decision about your financial future.”

If you have shared credit card debts, you can use a free tool like Credit.com’s Payoff Calculator to figure out a plan to pay off your debts.

One of the most common things that impacts credit scores after a divorce is when the person responsible for settling a joint debt doesn’t pay up, Heath said.

“If this failure to pay is on a joint account, it will affect both parties, including the innocent party’s credit reports,” Heath said in an email. “Even though the innocent party is not responsible for the debt, it is still reported as delinquent on their credit report.” 

If your ex isn’t paying the debt, and it’s messing up your credit, you can dispute the delinquency with the credit bureaus, Heath said. (You can go here to learn more how.)

Also, “you can ask the court to compel or find your ex in contempt for failure to pay,” he said. “You could also ask for your attorney fees and costs to do this.”

Monitoring Your Credit

As you update your accounts, it’s a good idea to make sure the changes take.

“Check your credit a few months after the divorce to be sure it is accurate,” Rebecca Zung said.

Too see where your credit currently stands, you can view your free credit report summary on Credit.com. This report is updated each month, so you can see how changes are affecting you as time goes on after your separation and if there are any other steps toward improvement that you need to make. You can generally improve your credit in the long-term by making all loan payments on time, keeping debt levels low and limiting new credit inquiries as your score rebounds.

[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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8 Steps to Rebuild Your Financial Life After Divorce

divorce timeline

If you’ve gone through it, you don’t need me to tell you how financially devastating divorce can be. Many people lose half (or more) of everything they’ve saved over their lives. This includes their home, retirement, business and investments. If that isn’t bad enough, divorced people often see their income wither while their expenses explode. No doubt about it, divorce is bad news financially.

Having said that, all is not lost. In fact, there are plenty of things you can do to improve your situation significantly. Specifically, if you’ve gone through divorce recently, here are eight things you can do now to help yourself get back on track as quickly as possible.

1. Do Not Panic Or Waste Energy

This is much easier said than done I realize, but you need every ounce of energy you can muster to rebuild your financial life. Don’t waste time worrying – it won’t help. Also, please know that you are not powerless. There are plenty of steps you can take that will help turn things around quickly (which I’ll share in a minute). Don’t worry. You have many choices, and as bad as it may seem, you probably aren’t going to be out in the street. Don’t waste energy worrying because it serves no purpose and saps you of the energy you need to get things back on track. (A divorce survival guide may be helpful too.)

2. Inventory Your Financial Life

You may or may not understand how finances and investments work right now, but that doesn’t matter. In time, you will improve your knowledge.

At this moment, it’s time to account for where you are and that means putting together an inventory of your financial life; income, expenses, assets and liabilities. I suggest you create a little spreadsheet or loose leaf binder. Make a separate sheet for income, another for expenses, another for assets and the last sheet for liabilities.

On each sheet, make a line item entry with the type of account, amount, who owns the account, what the rate is and the contact information at each institution.

It’s astonishing how empowering it is just to have one place to go to in order to get an overview of your finances. Knowledge is power, friend — take advantage of it.

You can also get your credit reports for free once a year — but you can’t check your spouse’s without their knowledge — so it’s not a bad idea to try to persuade your spouse to go over both your credit reports before you split up if that’s possible.

[Editor’s note: You can also get a free credit report summary on Credit.com, which includes two free credit scores updated monthly, at Credit.com. Check both carefully. Your credit report should include all your open accounts, including joint accounts you may have forgotten about (and ideally, should close). And a drop in your scores could be a sign that your spouse is running up balances on joint accounts, or failing to pay joint accounts he or she promised to pay.]

3. Balance Your Budget

I mentioned above how important it is to inventory your income and expenses. This is a priority. After a split, it may take you time to re-adjust to your new income/expense story. The problem is, you could dig yourself into a debt pit during the adjustment period. Please don’t let this happen.

If you don’t know what you spend on average right now, start keeping track. This is the most important piece of financial information you can have. With it, you’ll know if you need to cut back or get back into the workforce (if the expenses are higher than the income) or if your situation is stable.

If you figure out that your spending exceeds your income, it may not be pretty. But you are a lot better off knowing what the situation is than by ignoring it.

4. Make Sure Your Accounts Are Set Up Correctly

I get questions all the time from people who are recently divorced asking about how their accounts should be titled. Since I’m not a lawyer, I can’t provide that kind of advice. Also, the right direction for you might be different from the right advice for the person next door.

If you are divorced, your legal representative is responsible to advise you on how to take title to your accounts and also, who the beneficiaries should be on your accounts.

This topic is especially important when it comes to dealing with retirement accounts. Acquaint yourself with the rules on this, but don’t try to be your own attorney. Get good, sound legal advice when it comes to proper vesting and naming your beneficiaries.

5. Identify Priorities

Divorce often comes as a shock. If that describes your situation, you might feel as though everything is coming at you all at once. That’s understandable but dangerous. When people have too much on their plate they can easily become overwhelmed and then freeze up.

If you determine that you don’t have enough income to balance your monthly budget that has to be your first priority. If you (and your children, if you have them) depend on your ex-spouse for continued support, make sure they are required to buy life insurance and name you and the children as beneficiaries.

If you are stuck and don’t know how to overcome this problem, it might be helpful to talk to a trusted friend who isn’t as emotionally impacted by the split as you are. They might be able to see solutions more easily than you can right now.

If budgeting isn’t the biggest problem, great. What do you want to focus on? Improving your finances?  Finding new work? Moving? Make yourself a list of everything you want to do and discuss it with your objective friend in order to come up with an action plan and time frame.

6. Pick Your Team

In putting yourself back together financially, you can do a lot of the heavy lifting yourself, but you don’t have to. If your situation requires it, don’t be shy about getting expert tax, legal and financial advice.

Of course, you want to get referrals from trusted sources but don’t stop there. Make sure your team empowers you and makes you feel comfortable. It’s their job to make sure you understand what they propose doing and why. If you feel intimidated or confused, move on. It’s your money. You have the right to expect a professional and supportive team.

7. Learn

By taking inventory, balancing your budget, creating a priority list and assembling a strong team, you’ll learn a great deal about finance. But keep the wagon rolling. Devote 20 to 30 minutes a day to expand your education. Talk to experts. Ask questions. Attend webinars. Never stop.

I’ve been in this business for 30 years and I learn something new every day. Finance is fascinating and powerful. You can never learn too much.

8. Plan

By taking the steps I’ve mentioned, you’ll be well on your way to a more solid financial footing than when you first divorced. But if you want extra points, boldly go where few others go and create a financial plan for yourself with your new circumstances.

A financial plan tells you where you will likely end up if you continue on your current path and what you might consider doing differently in order to have a different outcome. This may seem like a daunting task but it’s actually not. If you don’t have an adviser you can run your own projections. If you have a financial adviser, you should already have a solid plan you can refer to.

Of course, if you already have a financial plan, you should update it to reflect the changes in your financial situation.

These eight steps won’t change your life overnight, but by taking it one day at a time, things will improve dramatically. And there is nothing here you can’t do. Take a breather. Enlist help from people you trust and who care about you. You don’t have to rush. You’ll see that rebuilding your life after divorce isn’t as hellish as it seems.

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How to Stay Together While Keeping Your Money Separate

sign a pre-nup

“Sign here. I love you, but you can’t have my money.”

Are those not the most romantic words you’ve ever heard? Prenuptial agreements are one way to ensure that your money stays separate while you are married, but can definitely be a killjoy when it comes to the relationship.

So what if you really want to keep your money separate but have decided that the prenuptial is not worth the headache, expense or aggravation? Are there ways to keep your money separate while you are married? The short answer is yes … most of the time. Certain assets can absolutely be protected. Others … not so much.

Drawing (State) Lines

The first level of the analysis is to find out if you live in one of the nine community property states. They are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, all property is presumed to be “community” property (of the property of both parties) and the burden is then on the one who wants to prove otherwise to the court. That this can often be a difficult task goes without saying. The principle behind this and all marital property law (as well as alimony law) goes back more than 100 years, and is that both spouses have a duty to support each other in all ways; morally, physically, financially.

The vast majority of the states are equitable distribution states. In those states, the courts will take a look at everything either of the parties has and make three piles: his, hers and theirs (with gay marriage now legal, the piles may be his, his and theirs or hers, hers and theirs, but you get the idea). So the his and her piles would contain assets, such as inheritances, gifts that were meant for just that one spouse and any assets that the party earned prior to the marriage that were all kept separate during it.

The caveat to the above though — and this is a big one — is that, generally, anything that either party actually “earns” during the marriage (including wages, business income for a business where one person works, 401K contributions, stock options — anything received for actual work), is going to be marital. Unless you have a prenuptial or postnuptial agreement, there is no keeping this element of your assets separate.

Furthermore, think of those “earnings” like a teaspoon of baking soda you add to your cake mix and stir up – once it’s in there, that’s it. You can’t decide to take the baking soda back out.

With those concepts in mind, here are a few ways to keep your assets separate.

1. Keep Your Inherited or Premarital Assets Separate

The word “commingling” is often synonymous with “lottery winnings” to one spouse; and “gambling losses” to the other. If you have an account that has funds in it that you either owned prior to the marriage or received during the marriage as inheritance or a non-marital gift that you mixed in to your earnings or joint funds from another bank account – then poof! The entire account becomes marital. Why? Because the courts consider money to be “fungible” meaning that once that marital dollar goes in, you can’t tell which dollar is coming back out. (Remember the baking soda.) To prevent problems and/or confusion in case of divorce, you can keep your premarital/inherited assets separate during marriage.

2. Don’t Put Your Spouse’s Name on the Title of Your Real Estate or Bank Accounts

Many people own a home prior to getting married. Oftentimes, especially if that home is where the married couple lives, the homeowner decides to throw the other person’s name onto the deed or the title of your financial accounts. While you could argue down the road, that you only did if for estate planning purposes, meaning that the spouse would be able to get the house and the money if you died first, that argument almost always fails in court.

To be certain, you don’t have to have this argument, just don’t put the other person’s name on the deed or your bank accounts – unless you are completely prepared to hand half of their value over to the other spouse in a divorce.

3. Be Careful About What You Use Your Earnings For

It is easy enough to decide to keep your own property in your own name and not add someone’s name to a deed or to a financial account. The rub comes when it maintaining that premarital property. This is where one or both of the spouses use their paychecks or other joint funds to pay down the debt on that property, or to make renovations or improvements to that property.

Now the court is going to be faced with trying to carve out which part of the value of the property might be marital and what part of the value has remained non-marital – a tedious and tortuous task. To keep it all clean, just use your funds from your premarital or inherited account to maintain your non-marital property, too.

By following these few simple steps, you should be able to keep the property you owned prior to the marriage, or inherited during the marriage as your own separate asset, without having to spend lots of money to litigate what was yours in the first place. You and your spouse can enjoy the fruits of your joint labor, and what the two of you built during the marriage.

[Editor’s Note: You can monitor your financial goals like building good credit for free on Credit.com.]

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4 Things That Can Make a Divorce Drag On

divorce timeline

One question new clients almost always ask is “how long will my divorce take?” And the answer is almost always the same; “It depends!”  Your attorney can only control his or her portion of the process, which can cause frustrating (and expensive) delays.  Here are some of the most common things that can make a divorce drag on.

1. The Judicial System

The judicial system, like most governmental entities, is overtaxed, overburdened, understaffed and underfunded. Each judge typically has way more cases assigned than is possible to efficiently handle. In the family law area, there are roughly 250 new cases per month and three family law judges (who don’t just have family law on their dockets). This means to get a hearing on a simple Motion to Compel Financial Disclosure can take several weeks and, quite often, several months.

This means if you need financial information just to do a business valuation and your spouse isn’t providing it, it takes a long time to get before the judge to obtain said documents.  Moreover, the judges don’t necessarily rule from the bench, but instead take the issue “under advisement” meaning more wait time for a ruling, which can often take months.

Meanwhile, clients are frustrated because their case isn’t going anywhere, their lives are on hold and they continue to fight with their soon-to-be ex. Tensions remain high and often even get worse during this time.

2. Financial Documents

In most jurisdictions, a certain amount of financial disclosure is required in any divorce. This usually includes income information, tax returns, bank statements and credit card statements. Further delaying the proceedings, sometimes there are account transfers for which you or your spouse may have no record. Therefore, more discovery regarding requests for production or interrogatories will be required.

3. Financial Experts

Many times, one or both sides have engaged a financial expert to do a business valuation or determine a self-employed person’s true income. They can also conduct a lifestyle analysis for alimony purposes or determine if a party is hiding money. This expert will often require financial statements, general ledgers, tax returns, credit card statements and possibly more.

In the event the proceedings involve custody, the financial expert may interview the parents or other family members. If these experts have a lot of cases or are having difficulty getting the documentation to conduct an accurate analysis for mediation or trial, this could also slow down the proceedings.

4. Uncooperative Parties or Opposing Counsel

If the lawyer or the financial expert determines certain information is necessary, they will send opposing counsel a request for said information. If the other side doesn’t share the information for one reason or another, the inquiring lawyer will have to file a motion with the court. This motion with the intent for sharing establishes a hearing in front of the judge, which could potentially tack on months to the trial.

Divorce is traumatic enough. Long delays can add to the already-elevated stress of the situation. Understanding there are certain components to the procedure over which you nor your attorney simply don’t have control may help alleviate some anxiety. Take deep breaths, mediate and have faith that what’s best will prevail in the end.

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