In today’s day and age, almost every American uses credit to one extent or another. Credit refers to your ability to borrow and repay money. Talk to different people and you will receive different responses regarding credit. Those in favor of credit will tell you that it allows people to get ahead in life. That the money you borrow is a springboard to better opportunities for you and your family. Instead of waiting to save up for a car or house you can borrow the money to make a purchase. You, then, have options on how to use your own money.
If you are entering a divorce with some concerns about your credit then you are not alone. Your credit score has about as much impact on your overall financial viability these days as your overall net worth. Protecting your credit and maintaining/improving your credit score is a reasonable goal. However, divorces are notorious for throwing people off track financially. What are ways that a divorce can impact your credit in Texas? That is what we are going to discuss in today’s blog post from the Law Office of Bryan Fagan.
Dividing joint debt in a Texas divorce
Let’s say that you and your spouse take out a mortgage together. When you bought your family home a few years back you contacted a mortgage lender and obtained a home loan. That home loan has both of your names on it. Doing that allowed you to borrow more money than either of you would have been able to individually. You found the perfect house and were satisfied with the terms of the loan. You’ve had no issues paying on the loan since you moved in. All was well.
However, now you are going through a divorce and that home loan is starting to worry you. For one, you don’t know what is going to happen with your house in the divorce. You have three kids so you would like to stay in the house. You’ve not had the opportunity to talk to your spouse about the issue yet. He has left to stay with his brother for the duration of the divorce. You’re not even sure if he will be willing to help you make the mortgage payment during the divorce.
Those are all valid, immediate concerns when it comes to the family home. One of the major, overarching concerns in a divorce should be what happens with your mortgage. The mortgage likely represents the largest piece of debt that you are responsible for. As we mentioned a moment ago that loan was issued based on your combined credit profiles and incomes. Now that he has moved out and a divorce is upcoming there is some uncertainty in your mind about that loan. Who pays it moving forward? Which one of you becomes responsible for it after the divorce?
Paying the mortgage during a divorce
One of the things that becomes quickly apparent during a divorce is that the rest of the world does not stop spinning because you are going through a divorce. When something dramatic is going on in our lives we tend to feel like the rest of the world should take notice. However, that is not how things work. Everything else in the world will continue as it did before your divorce. It is up to you and your spouse to handle all your problems together while still maintaining the rest of your lives.
This brings us to a conversation about how to handle the mortgage during your divorce. Your monthly bills still need to be paid even though you are in a divorce case. That means you cannot afford to fall behind in paying your bills. When it comes to paying bills you and your spouse hopefully had a plan to help make sure things did not fall between the cracks. With all the tumult surrounding the divorce, it is easy to see why a bill here or there may go unaccounted for. Don’t let the mortgage become one of those bills.
Talk with your spouse at the beginning of the case about how bills are going to be divided up. Many bills are on automatic payments, and it may be easiest just to keep those bills paid via automatic withdrawal. However, if you plan on separating your money in the early stages of a divorce you will need to make sure there is always enough money in your main account for paying bills. That goes for your utilities or your mortgage. Don’t use the divorce as an excuse to fall behind in paying your bills.
How is the mortgage handled after a divorce?
Now let’s jump to the end of your case. You and your spouse are nearing a settlement on matters related to a divorce. That’s great news. This way you can avoid the possibility of a trial. Ultimately you and your spouse know more about your situation than anyone. You two can create a plan that works for your family. It just takes some patience and consideration. Jumping right into your life post-divorce without a plan for your mortgage is a mistake. This needs to be something that you have an answer for before the divorce wraps up.
If you decide to sell the family home, then this is a moot point. Yes, you will need to pay the mortgage until the home is sold. However, it is not a long-term concern assuming that your house sells in a reasonable amount of time. What you need to focus your energy on with the mortgage is how that mortgage is paid if you do not stay in the house. Let’s assume that your spouse is going to live in the family home after the divorce. How are you going to make sure that the mortgage is paid even when you are no longer living there? It’s not as if you can march over to your ex-spouse’s house anytime you want and demand that he pay the mortgage.
Working with an experienced family law attorney offers you financial protection
This is a situation that requires you to have a plan. Working with an experienced family law attorney allows you to protect yourself from bad outcomes. The reality of a divorce is that nothing you decide with your debts impacts the actual loans or agreements signed with a lender. For instance, if your spouse agrees to live in the house and pay the mortgage that is fine. However, if your name is on the loan then the mortgage servicer will not stop looking to you for payment. If there is an issue with paying the mortgage in any given month they will continue to look to you. What can you do to protect yourself?
First, understanding this reality may stop you from agreeing to allow your spouse to remain in the home. If you know that he cannot afford that mortgage payment each month on his own then it would not make sense to agree to allow him to take on that responsibility. It is only a matter of time before he stops making payments on the loan. Then, the mortgage servicer will start contacting you for payment on a loan for a house you no longer live in. What do you do in this situation to make sure that you are on track to pay your bills and move forward with your life?
An experienced family law attorney with the Law Office of Bryan Fagan knows how to handle situations involving your home mortgage. Whether you are staying in the home or leaving it, we can help you plan so your credit and your finances stay intact. There are so many small details that can make a big difference in your life. Working with one of our attorneys means being protected from harm when it comes to the mortgage or any other debt that can negatively impact your credit moving forward.
What happens when the ex-spouse does not pay on joint debt?
It is an unenviable situation to find yourself with an ex-spouse who cannot pay a joint debt with your name on it. Even after a divorce, you may figure out quickly that your ex-spouse cannot or will not pay off a joint debt. Joint debts are those that have your name and the name of your spouse. When you all have trouble with coordinating bills during your marriage that is one thing. However not being able to manage your joint debts after a divorce is a different problem to have.
Remember- a joint debt is still owed by you even if the divorce decree says that it is now your spouse’s responsibility. The lender or creditor does not care what your decree says. That creditor just wants payment. If your name is on the loan, then you are still responsible for paying the bill. However, you are not out of options when it comes to holding your ex-spouse responsible for that payment. If he agreed to pay the loan after the divorce, then that is fine. You need to figure out how to hold him accountable for those times when he does not pay the bill as he agreed to.
Enforcing the terms of your final decree of divorce is not an option to consider. When you file an enforcement petition you are asking the court to hold your ex-spouse responsible for violating some aspect of your court orders. By filing an enforcement, you tell the court of a specific violation and then ask for relief. That could be a monetary penalty, attorney’s fees, or a range of other outcomes. Your ex-spouse can face a range of penalties associated with not paying any debt assigned to him in the divorce. However, holding your spouse accountable for their actions is possible only when you take the first step and file your enforcement. Working with an experienced family law attorney with the Law Office of Bryan Fagan makes that much more possible.
Separate households mean missed bills
Don’t drop the ball on your bills during your divorce. We know a lot is going on in your life right now. Even with so much going on it is not a good idea to let your bills go on autopilot. Rather, work with your spouse at the beginning of your case to determine a plan when it comes to making sure those bills are paid. Go through your checking account and see what your bills are, when they are due, and how much each bill costs. This should give you all the information you need to negotiate with your spouse.
The two of you can figure out how to divide those bills if you put your mind to it. Determining how to pay bills may be a function of considering your income. For instance, the more income you earn the better equipped you may be to pay bills. So rather than splitting the bills directly down the middle, you may choose to pay them according to your income. Whatever method for bill payment you choose to implement it is important that you have a plan. Something will get lost in translation if you do not have a plan when it comes to paying the household bills.
If you are leaving the family home, it still may be necessary for you to pay bills associated with the house. We have already seen how you are still responsible for paying the mortgage even if you decide to leave the family house. Additionally, if your spouse is in no position to pay bills independent of you then you still may be responsible for basic household bills. This requires communication on your part. The more you communicate with your spouse on this the less likely you are to see bills slip between the cracks.
Detailed budgets In divorce scenarios
If you do not have a detailed budget for your home, then now is a perfect time to begin that process. Budgeting four families does not have to be an excruciating activity. The families who are most successful in mapping out their finances do so because of having a household budget. Contrary to what many people believe, a household budget does not constrain your spending. Rather, having a well-thought-out and accurate household budget permits you to spend. You no longer must worry about having enough money in your checking account. It may also cause you to be less reliant on credit cards moving forward.
What many families choose to do with their household budget is to start at the top of a yellow legal pad. From there, you can begin to take into consideration your monthly income and your monthly expenses. Your income and expenses should not be something that you were unaware of. Many people have no idea just how expensive their lives become over time. Rather than be in this situation, you can gain a firm grasp over your monthly expenditures and your income. This will help your family tremendously.
Change in income
Another issue that sometimes goes unnoticed temporarily is related to changes in your income during and after a divorce. I say that this will be a temporary oversight because very quickly you will figure out that you only have one income in your household. It is easy to become accustomed to having multiple incomes in the household. This makes it easier for you to overlook and then overspend. Rather than fall into this trap you should begin to adjust your household spending immediately upon a divorce being filed. We have already talked about how budgeting is a key part of this equation. However, there are other ways to account for your change in income.
Start by assessing the biggest expenditures you have in your budget. For instance, your rent, debt payments, school tuition, and other bills take up large amounts of your monthly income. With that said, anything you can do to reduce these major expenditures should be considered. If you are renting, it may mean finding a place to live that is slightly less expensive. Your grocery bill may need to be reduced temporarily until your household budget can be reconfigured. Making your household spending more in line with your household income is a key part of the divorce process.
Monitor joint accounts closely
Finally, when you are divorcing you should keep an eye on all your jointly held accounts. This includes checking, savings, and any other account that you may share with your spouse. The more attuned you are to your spending and your bank accounts the better off you and your family will be. The last thing you want to see happen during a divorce is for your spouse to spend foolishly or to otherwise use money in a way that is not appropriate for this time in your life.
Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan
The attorneys with the Law Office of Bryan Fagan offer free of charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas family law. Before signing a document or negotiating on a subject you do not know well, contact our office. We look forward to the opportunity of serving you during an important part of your life. The Law Office of Bryan Fagan is on your side.
Evan Hochschild was raised in Houston, TX and graduated from Cypress Creek High School. He went on to graduate from Southwestern University in Georgetown, TX with an undergraduate degree in Political Science. While in college, Evan was a four-year letterman on the Cross Country team.
Following in the footsteps of his grandfather and uncle before him, Evan attended law school after he completed in his undergraduate studies. He graduated from St. Mary’s University School of Law and has practiced in a variety of areas in the law- including family law.
Mr. Hochschild is guided by principles which place the interests of clients first. Additionally, Evan seeks to provide information and support for his clients with the heart of a teacher.
Evan and his wife have four small children together. He enjoys afternoons out and about with his family, teaching Sunday school at his church and exercising. A veteran attorney of fourteen years, Mr. Hochschild excels in communicating complex ideas in family law simply and directly.
