Divorce – A Potential Credit Disaster
Most people know that divorce proceedings can be very costly in terms of time, money, and tears. Many people have the foresight to plan for the financial strain of divorce through the negotiation of a pre-nuptial agreement. However, what many couples fail to consider, and what may come back to haunt them years later, is the effect that a divorce may have on your credit. While not an immediate financial cost like court fees and distribution of assets, the potential damage to credit can have negative implications on a life long after the divorce has faded from memory.
How does this credit disaster take place? The root of the problem is that lenders are not required by law to honor court decrees which place the burden of paying off a joint loan on the shoulders of one party. In other words, even if a court decides that Spouse A is responsible for paying off a loan that Spouse A and B took out together during their marriage, the lending company may still hold both A and B accountable for the debt. If Spouse B mistakenly assumes that he or she is no longer bound to that financial obligation, he or she may be penalized for missed payments which destroy his or her credit score.
Of course, there are ways to minimize the risk that divorce poses to your credit. For example, if a divorce is brewing, you should start preparing your finances by splitting joint bank accounts, refinancing mortgages and car loans, and converting credit card accounts. You should also plan for the possibility that a bitter former spouse may try to take revenge on you by, for example, applying for credit cards in your name and ruining your credit. To prevent this, you can choose to opt-out of receiving pre-screened credit card and insurance offers before the divorce actually takes place.
There are many issues to consider and pitfalls to watch out for when going through a divorce. Things can turn ugly very quickly, as anyone who has been through a divorce knows. Don’t try to go through this difficult process alone – call a top-rated divorce attorney from the Fischer and Van Thiel law firm at (760) 757-6854 today.