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 are having 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 martial home is likely to be the most substantial financial asset that is 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.
In the event that both your name and that of your spouse appears on the mortgage then you will need to refinance the loan in order to remove your spouse’s name. There are other steps that 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 what refinancing your mortgage means is that you will be applying for a new loan based on only your credit history, income and other factors that are considered when issuing a home loan. An inquiry will be made by the mortgage company into your credit history and this alone can impact your credit and credit score. Couple this will 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 the purposes of this section of our blog. Instead of being awarded your home you are awarded a percentage of the equity in your home as a result of 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 going to be refinanced.
If you have agreed to receive your equity stake over a period of time then you are relying on your ex-spouse to live up to their terms of the divorce decree. If he or she fails 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 of time.
In order to have your credit suffer over a long time period you may need to file an enforcement suit against your ex-spouse in order to force him or her 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 if you find yourself in circumstances like these it may be your best option.
Update passwords on shared accounts as soon as you are able to
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 then it is wise to change the password and account login for that account as soon as you are able to. 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 bad 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 is not part and parcel with most divorces that I have been exposed to in my years of practicing family law. In fact, 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 animosity that is 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 in order 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 that are utilized are not common to our everyday vocabulary. What you decide to settle upon in mediation may look slightly different in paper in your divorce decree. For that reason make sure that you go over the decree with your attorney prior to the end of your divorce.
By doing so you will make sure that you are clear about what your financial responsibilities are. If you are to take on certain debts you will need to know when payments are due by and in 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 that 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 not only has your best interests at heart but also is willing to teach you the pertinent parts of the law and to 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.