When you go through divorce, it is typically a gut-wrenching experience that makes you reconsider your position in life. Besides the emotional pain that comes along with it, you also have to deal with a number of different money-related issues. Many people not only have their lives altered forever, they go broke in the process. If you are determined not to let your finances get the best of you in this situation, here are a few factors that you’ll need to consider.
Protecting Your Credit
If you want to be able to take control of your financial life, you need to make sure that your credit is in order. Your credit is one of the most important factors to consider when getting a divorce. Many people who go through a divorce end up destroying their credit because they were not careful.
When you file for divorce, that does not get you out of paying any of the debts that you agreed to. Your creditors don’t care that you and your spouse weren’t able to make things work. They just want to get paid. This means that if you and your spouse had a mortgage together, you will still be just as responsible for the mortgage after you got divorced as you were before you did. Any joint accounts that you had before you got divorced are still in the same condition as they were before. If you want to make sure that your credit remains intact, you need to check up on these accounts regularly. Make sure that they are being paid as required. This is true even if you are in the middle of a divorce proceeding.
Handling the Joint Accounts
When you get a divorce, your lawyers will usually help you negotiate what will happen to the debt. In this situation, the lawyers will typically divide the debt up equally, and determine who will handle what account. If you cannot come to an agreement with the lawyers, the divorce court will then divide everything up for you.
Once the accounts have been divided up, it is important to make sure that your name is taken off any accounts that you are not going to be servicing. In order to do this, you and your ex-spouse will need to refinance certain accounts. For example, if you had a joint credit card, and the court says that your spouse has to pay it, it’s important for your spouse to transfer the debt on the card. Once the debt has been transferred to another card without your name on it, then you will no longer be responsible for it.
The mortgage is another debt that should be refinanced. If one party is going to continue living in the house, then he or she will usually have to buy out the equity of the other person. The person who is going to continue living in the house typically has to get a new mortgage to pay off the old one. At that point, the other party can legally be removed from the mortgage debt.
When you go through divorce, it is also important make sure that you update all of your important documents. For example, you probably don’t want your ex-spouse to remain as the primary beneficiary on your life insurance policy. If you have a retirement plan, you should also update the beneficiary to a child or someone else. If you forget to do this, your money could go to your ex-spouse when you pass away.
Create a New Budget
After you get a divorce, it can sometimes be very difficult to get used to the new financial situation. If both of you work, you may be trying to get by on half of what you used to have, with nearly the same expenses. Many people get married because it makes sense to share costs with each other. When you undo that arrangement, it can be a tough pill to swallow. You’ll need to create a new budget that you can stick to. This may require you to reduce the amount of money that you spend on entertainment expenses, restaurant meals, and other unnecessary expenses to make it work.
When you are married, you probably apply for most loans and financing with your partner. Because of this, your creditors look at both of your credit profiles when determining whether they would approve you for the credit. Now that you’re divorced, you’re going to have to be able to get approved for financing by yourself.
This means that you’ll have to take the initiative to build up your credit. There are several steps that you can take to help boost your credit score. If you have large credit balances, consider paying them down to a level that is below 30 percent of the available credit. If you are in the habit of not making regular payments, start making them every month. You should also try to get a good mix of credit going. If you just have for five different credit cards, this doesn’t look that appealing to creditors. They like to see that you can handle many different types of credit at once.
Spousal and Child Support
In some cases, spousal and child support may come into play when you file for divorce. If your spouse makes a lot more money than you do, then he or she may have to pay you spousal support for a certain amount of time. If one parent gets sold custody of the children, then the other parent will typically have to chip in for child support payments.
The amounts for child support and spousal support are determined by the court. Factors like how much time the kids spend with you, and the incomes of both spouses will come into play in this situation.
Overall, the process of getting a divorce can be challenging. If you’ll be proactive about handling your finances, you can get back on the right track and live a comfortable lifestyle again.