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Under the radar ways that divorce can impact your credit, Part Two

In yesterday’s blog post from the Law Office of Bryan Fagan, PLLC, we introduced the topic of how divorce can have long-ranging impacts on your credit. If you have not already done so, I recommend that you go back and read through that blog before picking up with today’s post. We will continue that discussion today and introduce more topics for you to consider.

If you have to go through a divorce, then you know that it is a critical time in your life. While your credit may not be the first thing on your mind when beginning a divorce, it should be something that you give more than a passing thought to, however. We want to make sure that these issues are made known to you now, rather than at the end of your divorce or, worse yet, years after your divorce has already been finalized.

Will you have to refinance your home as a part of your divorce?

Your marital home is likely to be the most substantial financial asset divided in your divorce. For instance, suppose that you are awarded your home in the divorce. This means that not only do you get to stay in the home and continue living there, but you also will begin to shoulder the entirety of the burden for your mortgage. This can be a significant change for you financially, given that you formerly had two incomes that were available to pay for the mortgage.

If both your name and that of your spouse appear on the mortgage, then you will need to refinance the loan to remove your spouse’s name. Other steps work in tandem with this that your attorney can discuss with you, but for brevity’s sake, we will only be going over the subject of refinancing your mortgage.

Essentially, refinancing your mortgage means that you will be applying for a new loan based on only your credit history, income, and other factors considered when issuing a home loan. The mortgage company will inquire into your credit history, and this alone can impact your credit and credit score. The couple, this will be a new responsibility to pay on a mortgage by yourself, and you can see that the potential impact of refinancing your home can be very far-ranging.

Will you be receiving equity from moving out of your home?

Suppose that the shoe is on the other foot for our blog section. Instead of being awarded your home, you are awarded a percentage of the equity in your home due to agreeing to move out. This equity will typically become available either through your spouse refinancing the home and receiving the equity that is available during that time or by you agreeing to be paid according to a payment plan if the note is not refinanced.

If you have agreed to receive your equity stake over some time, then you are relying on your ex-spouse to live up to their terms of the divorce decree. If they fail to pay you according to the payment plan in your decree, then you may find that you are unable to pay attorney’s fees, creditors, and rent according to other agreements you made. It is difficult to change course quickly when you have been banking on receiving substantial sums of money over a regularly scheduled period.

To have your credit suffer over a long period, you may need to file an enforcement suit against your ex-spouse to force them to abide by the terms of your decree. I can understand if you are not overly excited about being back in court after a divorce, but it may be your best option if you find yourself in the circumstances like these.

Update passwords on shared accounts as soon as you can

If you and your spouse share access to jointly held bank accounts or credit cards, then you already know the importance of security in maintaining the funds and balances in those accounts. If a credit account or bank account is awarded to you in the divorce, it is wise to change the password and account login for that account as soon as possible. The reason is that you do not want to allow your ex-spouse to access the information to that account to make changes that could affect you negatively financially and credit-wise.

Imagine spending months and months in a divorce case planning how to salvage your financial future after a difficult divorce, only to find out that a week after your divorce, you left your bank account susceptible to having your spouse enter into it without your permission. That is not only a violation of your trust but also the divorce decree. While any evil acts by your ex-spouse can be undone, it will take time and money to do so.

The longer your divorce, the more of a negative impact it can have on your credit.

Most divorces are not what they are made out to be on television and in the movies. Yelling, screaming, and backstabbing are not part and parcel of most divorces I have been exposed to in my years of family law practice. Your divorce is likely to be resolved in mediation rather than to see the inside of a courtroom or judge.

However, there are exceptions to this rule, and without knowing you and your circumstances, it is fair to say that you could count yourself among these exceptional cases. The longer your case goes for, and the more hate fostered between you and your spouse, the more your finances will be stretched. The longer your case runs, the more attorneys fees you will need to pay. That is money that could be used to pay bills and other creditors.

While you may think that it will feel great to drag a case out to make your spouse “pay” for some action from the past, the reality is you will both be paying attorneys fees for the privilege of drawing out a divorce. Consider working with your spouse to the greatest extent possible to put this divorce behind you, which will allow you to focus on your post-divorce life- including your finances.

Make sure you understand your divorce decree before the end of your case

Divorce is tricky. The words and terminology utilized are not familiar to our everyday vocabulary. In your divorce decree, what you decide to settle upon in mediation may look slightly different on paper. For that reason, make sure that you go over the decree with your attorney before the end of your divorce.

By doing so, you will make sure that you are clear about your financial responsibilities. If you are to take on certain debts, you will need to know when payments are due and what amounts. Rather than assume that you understand the totality of your decree, contact your attorney to set up an in-person meeting for you both to sit and look at the decree together. It is not a defense to your violating the decree to tell a judge that you misunderstood something you were ordered to do.

Questions about divorce, finances, and credit? Contact the Law Office of Bryan Fagan

There are so many parts to a divorce case it is easy to feel overwhelmed. With that said, the best way to combat this overwhelmed feeling is to have an attorney in your corner who has your best interests at heart and is willing to teach you the pertinent parts of the law and make sure you understand the steps of your case.

The attorneys with the Law Office of Bryan Fagan, PLLC, offer free of charge consultations six days a week. If you have questions about the subject matter we discussed today, please do not hesitate to give us a call to schedule a meeting in our office.

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