23rd Jul 23 11:00 pm
JamiePost-divorce financial challenges are common. Lawyer’s fees, the cost of moving into a new house or apartment, and other related expenses add up quickly. Many Colorado residents may use credit cards or personal loans to cover these expenses, and once the signed divorce decree is final, they are left with a mountain of debt and a lower credit score. At Colorado Divorce Law Group, we understand the financial struggles many of our clients have. Call us today at (720) 593-6442 to learn how to make smart budgeting decisions during a divorce.
Rebuilding your credit score after a divorce is similar to rebuilding a poor credit score at any other time. Start by obtaining a copy of your credit report. Everyone may request one free report each year from the three primary credit reporting agencies (Equifax, Experian, and TransUnion), and obtaining these online is easy.
Once you know where your starting point is, you can take steps to improve it:
Then, follow these six steps for how to rebuild your credit:
Rebuilding your credit means showing that you can use it responsibly. Credit reporting companies look mainly at how much available credit you use and whether you can be relied on to make payments on time.
Your marital status does not affect your credit score. However, splitting open accounts and allocating debts as part of the divorce decree will impact your credit score, and how it does depends on which debts you assume. If you are still listed on joint accounts but you no longer have financial benefit from the asset it is attached to, such as a car, then you need to address that, preferably prior to the divorce. For more information on the distribution of assets and debts, see How Property And Debts Are Divided During Divorce.
Post-divorce, if you are still listed on joint accounts or loans and your ex-spouse does not make the payments on time (or defaults), then your credit score will go down, too. A divorce decree will not break a contract you both signed with a lender, which is why determining who will assume which debts during divorce negotiations is so important.
Your credit score will not automatically go up after a divorce — it may take some work on your part, but ensuring that you are only responsible for your own debts can go a long way to ensuring it does not go down.
Rebuilding finances is challenging after a divorce, especially adjusting to a single income to support a household. Setting a budget with your current income, including any child support and alimony payments, can help you determine your needs and where to cut expenses to start saving money or paying off debts.
Next, take an inventory of your new financial picture. For example, you may be in a different earning bracket for income taxes, so you may need to adjust your withholding with your employer. Remember that the IRS taxes alimony as income, so account for this when preparing your taxes.
If you have not opened your own bank accounts yet, do so, including checking, savings, and a retirement account if necessary. You could also be eligible for credit cards in your own name, which can help you rebuild your credit post-divorce.
Finally, pay close attention to expenses and “extras.” Create an emergency fund just in case, about three months’ worth of income.
Yes, but you will have to contact each credit reporting agency separately and ask that the spouse be removed from your credit report. You may need a copy of the divorce decree, and each agency will have its own method of removing the other spouse from your report.
However, if you are still listed on any open lines of credit or joint accounts, then you need to settle your association with these accounts right away. The discovery process during your divorce should have uncovered any financial debt or asset associated with you. When you work with a divorce attorney from Colorado Divorce Law Group, you can be confident that we will find every debt and asset during discovery and negotiate for a fair distribution of debts and assets so that you are not left in financial straits post-divorce.
Improving your financial picture after divorce may mean making some difficult choices. First, expect your income level to drop. One option during divorce negotiations is to have limited spousal support from a higher-earning spouse. This is limited alimony for a short period of time to supplement what you currently earn so that you can go to school and finish a degree or get a certification for a higher-paying job than you currently have.
Then, consider the marital home. Even if you can afford to keep up with the mortgage payments, can you also afford the upkeep of the house? Your utility bills may not change much after your spouse moves out, and your child support and/or alimony payments may not be enough to cover all costs associated with the house.
You may need to sell the house and move somewhere smaller, at least until your income level rises. Or you may need to part with other assets to keep the house until you can get a better job to afford it.
Have you been served with divorce papers, or are you contemplating leaving your spouse? Colorado Divorce Law Group is a team of family law attorneys dedicated to protecting our clients during a divorce. We fight to ensure you receive a fair share of marital assets and provide insightful advice tailored to your situation. Contact us today at (720) 593-6442 for a consultation with a Colorado divorce lawyer.
