How divorce may impact your credit scores

Many divorcing couples have co-mingled their financial and credit accounts, which can impact your credit score after the divorce. If you are considering a divorce, you should take a full inventory of all of your joint accounts including any real estate holdings, credit cards, or bank accounts, so that you can work with your attorney to sort through them, and figure out who may have responsibility for them and other bills after a divorce.

You may also want to consider removing one spouse’s name from a joint credit card, or closing joint credit card accounts altogether.  However, you should consult with an attorney before taking this step.

If your divorce decree specifies who is responsible for accounts that were opened during the marriage, you should still be aware of what those accounts are so that you can also notify the lenders or financial institutions of your divorce.

“If the spouse responsible under the divorce decree is unable or unwilling to pay and the contract has not been changed by the lender, the late payments still will appear on both credit reports and will have a negative impact on credit scores for both individuals,” according to an Experian expert response.

To read more about what you can do to protect your credit, read this.

How should I handle my finances post divorce?

It’s not uncommon for divorcing couples to have reached a final decree that makes the divorce official, but to still have assets that are not fully divided. If you or your spouse have a work-sponsored 401(k), ownership of company stock, or shared real estate or investment property, there are a handful of steps you’ll have to go through in order to ensure the assets become fully divided.

An attorney can help you first secure a qualified domestic relations order, which can help you divide the 401(k). If your spouse is the holder of the 401(k), you can then roll that money into an IRA, where it can maintain its tax-deferred status.

Likewise, the order can help you sell or divest your interest in your ex-spouse’s stock with his employer, and may help you secure any interest in equity you might have in shared real estate or banking accounts.

Beware that in addition to any potential maintenance or child support payments you may be receiving, that you should plan to budget your finances to ensure you have enough for emergencies and to ensure you are planning for the future. An attorney may help you in this endeavor, or he or she may be able to provide you with a reference for a financial planner.

In addition, there are a variety of helpful websites and articles on this topic that may provide examples of how you might plan best for your life post-divorce.

Calculating child support

In divorces or separation cases where children are involved, the court takes asset allocation very seriously. Its primary concern is ensuring the best interests of the children are protected. That may mean that a parent who is more financially secure than other may be responsible for child support payments. 

Regardless of the parties’ financial status, the court will work to ensure that both parties are aware of and agree to a financial plan for the children. This can include a range of things like who will pay for health care insurance, doctor’s visits, extracurricular activities, and more.

If you or a loved one are considering a divorce but you aren’t sure if you’ll be able to afford raising children without your former spouse’s help, the state of Colorado has developed a useful online calculator that may help you determine how much child support you may receive or have to pay. While the calculator may help you get an initial idea of your financial landscape, it’s best to discuss child support and all of your options with your attorney, who can help advocate for the best results for both you and your children.

Similarly, if you are having issues collecting your child support, contact your attorney to discuss your options. You may also want to research the range of resources that the federal and state government share to help parents who are having difficulty collecting child support payments.

The difference between equitable and equal division

Colorado is a marital property state, which means that property and assets that the couple owns together will be divided equitably.  Equitable division is not the same as equal division of property, which is the state law in some other areas of the country.

Because an exactly equal division of property might not be fair to both parties, Colorado law instructs judges to divide the property equitably or fairly. In many cases, that means there will be an equal division, but the court can consider a range of factors when deciding who will receive what.

Among the chief considerations a judge may use are how much each spouse contributed in purchasing the property, including nonmonetary contributions as a spouse may make as a homemaker; the economic circumstances of each spouse at the time of the separation; and whether division of shared property might affect children; 

In addition to those considerations, the judge will also work to ensure that existing debts or loans will be paid.

Some general rules: 

• With some exceptions, property acquired during marriage is generally marital property, regardless of how it is titled.

• Marital property includes real property, stocks/mutual funds, retirement plans (including military retirement), bank accounts, the increase in value of one spouse's separate property, and tangible property such as vehicles and household goods.

• Generally, property that either spouse brought into the marriage is the separate property of that spouse, but there are exceptions to this as well.

• Be prepared to discuss these and other issues with your attorney and ensure that you have full records on any and all property that may be subject to division.

Paycheck To Paycheck

According to a recent report, more than 42 million women and nearly 30 million children who depend on them are living in or are on the brink of poverty. Many of those women are single mothers working to scrape by on enough to support their children. A new HBO documentary, which can be seen for free on HBO.com, profiles the story of one of those single mothers and the struggles she faces in making ends meet for her family.

For many of those living on the brink, some small changes can help make differences in day-to-day living. Here’s a guide of helpful tips on managing money from making small changes to a budget to how to negotiate a higher salary.

Key things to consider when thinking about divorce

The decision to end a marriage is not an easy to one make. When you think you have reached a point where divorce is the only option, it’s important to think critically about your next steps before you proceed.

One major thing you should consider when thinking about divorce is your finances. Regardless of your current financial situation, divorce can put a strain on any family’s budget, particularly those where the couple relies on one income.

Before you file for divorce, think about your current cash flow and your debt obligations. It’s important to know what you will be able to afford after your divorce. Include your mortgage or rent, cost of groceries, child care and general living expenses in your thought process.

Consider making a budget and researching any expenses you may incur as a newly single person or a newly single parent. Monthly maintenance payments, or support checks from one party to another, are not guaranteed, so factor your budget based on the possibility that you may have to solely rely on your own income for a period of time.

If you are not currently employed, it may benefit you to begin looking for a job or seeking out job training programs. It can sometimes take many months for a case to make its way through the court process, so consider how you will pay bills in the meantime.

Other key considerations include parenting arrangements for those couples with children. Think about what you will do if you are the primary caregiver for the next few months. Identify your support network or those people you can rely on if you need help as a single parent. If this network includes your current spouse, be sure to create a mutually agreed upon schedule and set of boundaries. This can help lay the groundwork for a parenting plan after divorce.

Contact Michal or Josh if you are considering a divorce, and would like information and guidance as you make your decision.