Rebuilding Your Finances after Divorce
Divorce can be hard on your finances and on your credit. Some of the damage is inevitable for most couples-the same amount of money you were earning in one household now has to stretch to support two, and it can be a difficult adjustment.
However, some of the financial problems that arise out of a divorce occur because bills don't get paid while the divorce is pending, or one party doesn't live up to his or her obligations after the final decree.
For instance, many people in the process of a divorce hold off on paying bills until they find out who the court will hold responsible for that particular debt. Perhaps that's even a strategic decision, but it has some serious downsides. For instance, late fees and interest continue to mount while the couple is waiting for a court order. And, perhaps more importantly in the long run, those missed or late payments can seriously damage your credit score.
Even after debts are divided by the court, one party may fail to make payments as ordered. Where joint accounts are involved, this can hurt the finances and credit scores of the spouse who isn't responsible for the debt as much as the one who is. That's because the divorce court doesn't have the power to erase your obligation to a credit card company or other creditor. Although recent changes to the U.S. Bankruptcy Code have provided some protections when a former spouse files for bankruptcy protection, legal hassles and credit damage can occur while you're enforcing your rights.
Thus, many people find themselves in financial distress after divorce. Many even find that the best option is to file for bankruptcy and start fresh. Whether you're pushed into bankruptcy or you're able to get back on your feet financially through less drastic means, you'll likely have to think about rebuilding credit in the wake of a divorce. If you've monitored your credit report regularly and understand what impacts your credit scores, this process will be second nature to you.
However, if (like many people) you've never given much thought to your credit scores or paid much attention to your credit report, now is the time to start. The first step is to order copies of your credit report from all three major credit bureaus. You can obtain free credit reports from each bureau once a year through www.annualcreditreport.com. If you're working to rebuild credit, though, once a year isn't enough. Monitoring your credit report on a regular basis is critical.
If most or all of your accounts have been joint accounts with your spouse, you'll want to establish separate credit and start working on improving your credit scores. This can be difficult if your credit report has taken a hit during the divorce process and your household income has decreased dramatically as a result of the separation from your spouse. It may be that you don't qualify for the best interest rate available at this point, but that doesn't mean that you have to fall victim to predatory credit card companies whose introductory fees will eat up most of your available credit and further damage your credit scores by making you look "maxed out" right from the beginning.
Shop for credit carefully, plan carefully, and you can rebuild your credit and your finances-perhaps much more quickly than you think.
Request a Free Bankruptcy Evaluation with a Local Attorney
Are you going through a divorce and have a lot of debt between the two of you? Filing for Bankruptcy might be a solution for you. Fill out the form below or call (866) 607-9207 to discuss your financial situation with a local bankruptcy attorney.