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Financial Considerations Before You Divorce

The following financial considerations are important, as divorce and credit go hand in hand.  How you proceed now can affect you financial standing in the future.  It is vital  to make sure that all payments for the mortgage, rent, utilities, loans, and credit cards are made on time. Because delinquent accounts will affect your credit severely in the future, call all accounts and request to be notified of any missed payments.  You may want to freeze or close joint credit accounts, or better yet, ask the creditor to convert them to individual accounts in the name of the person who will ultimately be responsible for the debt.   Making account changes before the divorce is finalized saves a lot of headaches.

Dividing Marital Assets

The biggest financial considerations center on dividing the assets.  Because not all assets are created the same, you need solid information when deciding how to split everything.  The consequences of not understanding and finding out when it is too late can be financially and emotionally devastating!  To make sure that you get what you deserve, check out the Financial Custody: You, Your Money, and Divorce.  This book explains in detail the property distribution aspects of divorce and separation. It focuses on the rights each spouse has under certain laws, situations, and circumstances, and how the division of the property will be decided by the court or through negotiation.

Your Credit Standing

Another very important financial consideration in your divorce is to find out what your credit rating is.   You should get a credit report now to determine if there are any blemishes that will hinder your future ability to borrow money.  If there are mistakes on your credit file, or if a reported debt has been paid off, contact the reporting agency to rectify the situation.  

One service that I like is True Credit, which is a division of TransUnion.  They not only offer you unlimited access to your credit reports--you'll also receive a free credit score and 24-hour email notification of critical changes to your credit report.. All this online in seconds. From the name you trust.  Click here for your FREE credit report!

If you have a history of irregular payments on outstanding debts, you should contact the individual companies  to see if they will lower the payments. Once you have made regular payment for six months, they should remove the blemish from your report. 

Establishing Your Own Credit 

Once you have determined your credit history, a wise financial consideration is to establish credit in your own name.  The Discover® Platinum Card is a good card to consider, with competitive rates and low fees.  When applying for a card, keep in mind the varying interest rates, as a lower interest rate equates to lower monthly payments.  Also be aware of whether the interest rate is variable or fixed.  A teaser rate on a variable rate card may be enticing, but can eat your lunch when the introductory rate is over, and the rate then soars to over 20%.  With this in mind, choose a card with a low fixed rate.  

Set Up Your Own Bank Accounts

Another financial consideration is to establish your own bank account.   If your paycheck is automatically deposited to a joint account, have it switched to an individual account in your name only. You may also want to take your name off joint accounts, since you can be held liable if your spouse over-draws on that account.  If it seems likely that your spouse will clean out all the accounts, take your half and put it in your own account. If he is a signer on the children’s accounts, you also need to have his name removed, or have the money transferred to a different account.

 Filing Your Taxes

If you are separated, as a financial consideration, you can file your taxes separately as “head of household”. Detail who gets to claim the children as dependents in your legal separation. Keep this deduction if at all possible; it can mean money in your pocket with the earned income credit. If you are claiming the children as your dependents, make sure that your husband doesn’t also try to claim them. The last thing you need is an IRS audit

Insurance Coverage 

Your insurance coverage also needs to reflect your change in status. If both names are on a policy, and your spouse has an uncovered liability, you can be held responsible. The best financial consideration is to take your husbands name off the policy, or get your own policy (and take your name off his). If you don't already have an insurance provider, you can shop for the best insurance rates online  at Netquote.com.


©Tracy Achen 2001   At WomansDivorce.com we have one focus - helping women survive divorce and rebuild their lives. (This article may be freely reproduced provided it is unaltered and the above information is included.)

For information more information about financial considerations during divorce, continue with....
Credit Considerations
Divorce and Credit Card Debt 
Financially Prepare For A Divorce
Other Divorce and Money Issues

Remember, legal information is not legal advice. For specific advice, please consult a lawyer. 

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