No matter how amicable your divorce is, it will have consequences for both your and your spouse’s financial outlook for some time to come. Divorcing spouses sometimes worry what this could mean for their credit score, which may in turn affect their ability to buy a new home or finance a vehicle. There are strategies you can adopt that can reduce the likelihood of a negative hit to your credit score from your divorce.
Starting over is tough, and is something you didn’t expect when you got married. Orlando Family Team is here to walk you through your divorce so you come out on the other side ready for the changes it will bring.
How Can Divorce Affect Your Credit?
A divorce will not directly affect your credit or your credit score. The clerk of court does not report divorce judgments to the credit bureaus. But for many people, a divorce means a sudden change from two paychecks down to one. Or, worse, it could mean a drop from one to zero earners if only one of the spouses worked during the marriage. This is where many newly separated and divorced spouses get into trouble.
More specifically, you may run into problems with the following:
- Paying your own bills. You’re on your own now, and your income may be insufficient to keep up with your monthly expenses. Downsizing your home and spending can help, but regardless, you’re now budgeting with just one paycheck.
- Paying for marital debts that were distributed to you in the divorce. During divorce, the parties will be distributed marital debts and assets. You could find yourself suddenly being responsible for a massive credit card bill or other debt.
- Joint debts that were distributed to your ex-spouse. It’s likely that if you have joint marital debts, your ex-spouse will be ordered to pay some of them. But a court order to that effect won’t remove your name from the joint debt. If your ex-spouse fails to pay, it could damage both your credit scores.
- The mortgage on the marital home that was distributed to you. You may have fought for the marital home during the divorce, but can you now afford the mortgage? Just as any other debt you’re now responsible for, falling behind on the mortgage can damage your credit.
How Your Family Law Attorney Can Help
If you’re worried about the effect of divorce on your credit score, it’s critical that you address your concern with an experienced Florida family law attorney. Credit issues raise three specific family law matters that you should be ready to talk about:
- Alimony. One purpose of alimony is to put a dependent spouse on relatively equal footing with the more financially advantaged spouse. There are several different forms available, depending on your circumstances. But beware: alimony in most cases is not forever. Even “permanent” alimony, which is rare, can be modified or terminated.
- Equitable distribution. The question of which spouse will take each marital asset and debt is answered by the process of equitable distribution. Before you decide which assets and debts you want, however, you need to know what you can afford. How will you pay for the marital home if it’s distributed to you? And how will you ensure that your ex-spouse pays for the debts he or she is ordered to pay?
- Child support. If you’re a parent, you may need child support to help meet your child’s reasonable needs and expenses. This money won’t last forever, but while you have it, can be a vital form of support for expenses in your new household.
What Can You Do To Protect Your Credit?
There are some practical steps you can take to potentially lessen the impact of divorce on your credit. Working with your attorney, you should discuss the following:
- Prepare a budget. If you never budgeted during your marriage, or even if you did, now is the time to prepare one for being on your own. There are many free budgeting apps and websites available, and your attorney can discuss expenses you might not have considered.
- Spruce up your resume. You might have been a stay at home parent during your marriage or worked a job just to make some side money. But after divorce, you have to be ready to go back to work. Ask your attorney about rehabilitative alimony, which is intended to help spouses acquire skills or education so they can re-enter the workforce and become self-sufficient.
- Be honest about your current income. Talk to your attorney about your current income situation, and your ability to pay your monthly expenses. Your attorney needs as much detail as possible so you can request an appropriate amount of alimony or child support.
- Stay on top of marital debts before divorce. Before spouses divorce or separate, it’s not unusual for one to suddenly make excessive purchases and run up debt. If you have proof your spouse did this, then he or she should take a greater share of that debt in the divorce.
- Stay on top of joint debts after divorce. If your spouse is ordered to pay for a joint marital debt, remember, it doesn’t remove your name with the creditor. But a judge can hold your spouse in contempt of court for failing to pay for debts that were included in your divorce judgment.
- Remove your ex-spouse from credit accounts. Divorce includes financial divorce, and that means removing your ex-spouse from any joint credit accounts that you can. You don’t want your ex-spouse to be able to charge more debt to that account after your divorce.
Talk To Orlando Family Team About Your Debt And Credit
Our goal at Orlando Family Team is to help you get through your divorce in the best financial shape possible so you can move on with your life. Let us help with any questions you have about debt and credit. Give us a call today to schedule a consultation.