| Brad
Stroh
Whether it comes before or after the papers are signed, economic
hardship is all too familiar to many couples who divorce. Following
a few financial guidelines 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 following
a divorce. By taking steps to protect credit, families can come
through in much better shape. Bills.com, a national consumer finance
portal, encourages divorcing couples to take the following steps:
1. Accurately assess debts and liabilities. First,
see yourself as your creditors do. Online (see http://www.myfico.com
) or by phone, you can request a "tri-merge" credit
report (a summary from all three major credit reporting bureaus).
Note all of your existing shared and individual liabilities. Settle
(or get a judgment) on how you'll allocate these responsibilities.
2. Plan on how to handle 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 agreement
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.
Article Source: http://www.article-matrix.com Brad Stroh is currently
co-CEO of Freedom Financial Network and Bills.com. If you would
like more of Brad’s articles, please visit the Bills.com
information on Debt.
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