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Credit and Divorce: Get your finances in order by borrowing smart

Credit is a funny thing. Two generations ago, our grandparents had a mortgage on their home- a home that cost around $10,000 most likely. One generation ago, our parents started using a credit cards for emergencies and big purchases. Nowadays, you and I probably have five or six credit cards combined and think nothing of it. Has our need for credit gone up that exponentially in just a few decades? No, but our need to keep up with the Jones and the stigma of credit had long since faded have contributed to the rise of credit.

A lot of people think that it takes money to make money. Or that the little guy can’t get ahead without some help from Visa. Home mortgages are necessary, given the skyrocketing prices associated with real estate. No matter what position you take when it comes to the use of credit, the fact is that if you check your credit report, there are likely several accounts open where you are paying interest for good and bad decisions that you have made in your life. This isn’t a judgment, but it is an observation that you should take seriously as you begin to plan for a divorce.

Your financial life is not going to improve during your divorce. You will be paying for an attorney and the costs associated with maintaining an active divorce case on the docket in the county where you reside. Progress doesn’t come cheaply, as you will soon learn. At the same time, your life after divorce can improve your current life. You first have to figure out how to get there.

Being intentional about your divorce is the only way to make it out better than when you got in. At the end of the Super Bowl, no player on the winning team has ever asked himself how he got there. Winning the Super Bowl is an intentional act that takes years of preparation and hard work. Divorce is no different. Work hard and prepare the path for a successful divorce to travel down. How you can do this with your credit will be today’s blog post topic from the Law Office of Bryan Fagan, PLLC.

Credit explained in the context of a divorce in Texas

As discussed at the outset of today’s blog post, credit is an integral part of most people’s financial lives. Whether you borrowed money to purchase your home, financed an expensive medical procedure with a credit card, or helped your child pay for college by taking out a student loan, debt is looked at as being unavoidable in our world today.

Credit, at its best, is a tool that you can use to soften the edges of your life and to accomplish things that you otherwise would not be able to. As a married person, this was true, and now that you are planning to transition into singlehood, you will need to plan for credit to be a part of your life. That is, of course, unless you swear off the debt altogether. You can pay your debts off by working hard, budgeting, and focusing on your goals. This is the most challenging road to go down and is probably the last thing you will want to do after going through a tough divorce. However, if it interests you, I bet you can hop online and find a person or two that has a proven method for eliminating debt and building wealth.

Back on the subject, if you can use debt as a tool to give yourself some wiggle room and build financial stability, then more power to you. Left uncontrolled debt is a means to a wrong end, like a horror movie where the ending is visible to everyone but the poor sap on screen. Don’t be that poor sap. Read on and plan for success in your real-life movie.

Immediate steps to take during and after your divorce

Start by requesting a copy of your credit report. This is smart for several reasons, but I will key on a couple right now. First of all, you need to see if your spouse has opened up any credit accounts in your name without your permission. Second, you will need to know precisely how much debt is held in your name so you can negotiate with all of the information available to you. Third, if you know how much debt is held in your name, you can have a good idea about how much debt you will be responsible for paying when your divorce is completed. Odds are any debt held solely in your name will be yours to take on (other than the mortgage).

Next, you should open your bank account separate from your spouse. This will allow you to start to deposit your paychecks and differentiate your finances from your spouse. Importantly you do not want your spouse to have electronic access to your checking or savings accounts. Yes, there is likely a standing order in place for the duration of your divorce that bars them from accessing your information. Still, it is easier to remove any possibility of wrongdoing on their part.

The last tip I would give in this area is to change beneficiaries on wills and life insurance policies. Suppose the worst happens- you divorce your spouse, and then a week later, you pass away suddenly. Instead of your children, your family, or a charity receiving whatever wealth you have accumulated in life, it could go to your ex-spouse because you didn’t change your beneficiary designations in time. That would be an all-time frustrating event, to be sure. Do what it takes to ensure this doesn’t happen. If your standing orders don’t allow you to do this during the divorce, stop by your estate planning attorney’s office to get your will and other documents changed as soon as you are officially divorced.

Your credit is examined in detail.

It is easy to lose sight of critical topics in a divorce, and credit is just the type of subject that can get swept under the rug beneath immediate concerns related to money, spouse, and children. You may not feel like you have time to worry about your credit or other long-term issues associated with credit. Still, I can assure you that the future version of you will not be happy with the present version of you if you cannot be proactive about protecting your credit.

Keep track of your bills and make sure everything is paid on time and in full during your divorce. The temporary orders phase of your case will center around this subject. If you were the spouse who did not handle your bills or the finances in general, this is all going to be a shock to your system. You will be under more stress to get everything right. However, some stresses are good, and this is one of them. The lessons you learn now about handling yourself, and your finances will last with you for a long time to come.

In tomorrow’s blog post from the Law Office of Bryan Fagan, PLLC, we will continue to discuss the topic of credit by engaging in a complete-fledged and detailed discussion on this subject. Protecting your credit and beginning to establish a play for developing a relationship with credit as a single person will be our focus.

Questions about divorce and finances? Contact the Law Office of Bryan Fagan, PLLC, today.

If you have questions about the role that credit, your finances, and money play in a divorce, please do not hesitate to contact the Law Office of Bryan Fagan, PLLC, today. We offer free of charge consultations with our licensed family law attorneys six days a week. It would be an honor to meet with you to discuss your questions, goals, and concerns as you head into a divorce. We represent clients across southeast Texas and do so with pride.

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