Divorce, dissolution and separation are times of upheaval—legally, emotionally, socially, and yes, financially. A large part of the stress you may experience is concern about finances during and after the process of divorce or dissolution. Will you have enough money to pay your mortgage or rent? Will you have to pay spousal support or child support? How will you make it without your ex’s income? What will happen to your retirement accounts? These are just some of the many questions that may be going through your mind. Fortunately, there are measures you can take to help minimize the financial disruption caused by splitting from a spouse. Take these five steps to help you prepare financially for divorce when undergoing a termination of marriage.
Pull a Copy of Your Credit Report
Did you know that there’s no such thing as a joint credit score? Your credit is yours alone, and after your divorce, you are going to need it to be in top shape. Review your credit report carefully. Are there any accounts you don’t recognize or loans you didn’t take out? Make sure there are no errors that could be dragging your credit score down, or, worse, debts your spouse might have incurred in your name and without your knowledge or permission.
Getting a copy of your credit report will also give you a reality check as to what you may be able to manage as far as a new mortgage, car loan, etc. after divorce. Depending on the strength or weakness of your credit score, you may want to approach your settlement negotiations differently than you had planned.
The attorneys at Melissa Graham-Hurd & Associates will want to review your credit reports with you, and can instruct you on how to obtain copies of them.
Get Your Financial Information Organized
Spouses in a marriage tend to divide tasks between themselves, and that includes the work of managing money. The result is that one spouse often has less information about the couple’s finances. Perhaps your spouse earns more money, so you let them manage the investments. Or you’ve always been in charge of the banking and bills, and they don’t have a handle on the monthly expenses.
When it’s time to divorce, all that has to change. You need to have a complete picture of all of the assets and liabilities in your marriage so that you can understand whether a proposed property division is fair. Even the not-so-obvious assets have value. Having a solid understanding of your marriage’s finances will also help you plan for your own financial life after divorce.
As soon as possible, and ideally before your divorce case is filed, gather copies of deeds, titles, recent tax returns, bank statements, credit card statements, investment and retirement account statements, mortgage and auto loan history reports, and other documents about your assets and debts to share with your attorney.
Melissa Graham-Hurd & Associates has a checklist of documents that they recommend you gather, and will tailor that checklist to your particular circumstances at the first planning meeting.
Make a Budget
Often people are so focused on getting a divorce that they fail to plan adequately for life after divorce. An essential aspect of planning is budgeting. Budgeting will help you understand your needs and what you can afford. Having a budget in place before you reach a settlement will help you avoid settling for less than you really need. Be aware that some expenses, like child care, may go up after divorce, while others may go down.
Having a budget, and knowing you will have enough income to meet your expenses, will significantly reduce the stress of divorce. But if you’ve never made a budget, you are not alone. Not sure how to make a budget? There are many free tools online specifically for divorcing individuals. Better still, if you can, meet with a certified divorce financial planner to get a grip on your finances.
Melissa Graham-Hurd & Associates will review your monthly budget with you, and will help you prepare the financial affidavits to be filed with the Court.
Pay Off and Close Joint Accounts
Your divorce decree will divide the assets and debts you and your spouse have accumulated during your marriage. In Ohio, “during the marriage” generally means from your wedding date through the date of your final divorce hearing, although in some cases a “de facto” termination date of marriage is more equitable. You want to make sure that your spouse neither conceals joint assets nor increases joint debt, for which you could be held responsible, before the divorce is final.
Remember that you can be held liable for the full amount of any debt you committed to jointly with a spouse, like a joint credit card. Let’s say your joint credit card had a $5,000 balance at the time of divorce, which the divorce decree made your spouse responsible for. Let’s also say your now-ex spouse stopped making payments, in violation of the divorce decree. The credit card issuer could come after you for the full amount. The divorce decree means you could go after your ex to reimburse you, but by that time, your credit would be shot, and it could be difficult to actually get the money from your ex. It’s much better to pay off joint debt during the marriage if you can, and close joint accounts before your divorce. This will give not only you, but your soon-to-be ex, peace of mind.
The attorneys at Melissa Graham-Hurd & Associates can guide you through the process of assigning debt, closing accounts and avoiding debt problems.
Get Your Advice From the Right Place
There is a lot of financial advice available in books, from friends and family, and on the internet—after all, you found this article! But not all financial advice is created equal, and some could actually come back to haunt you in your divorce case. You need to be able to get advice that you can trust, and the best place to do that is from your attorney. Some things you hear from your cousin or read online may sound wise, but they could have legal implications and therefore best discussed with your lawyer. So before you take any action, especially if it seems major or feels sneaky, run it by your attorney. The attorneys at Melissa Graham-Hurd & Associates know the divorce laws of Ohio and can advise you how best to protect your financial health during and after your divorce. Most importantly, they are on your side.
If you are thinking about divorce, we invite you to contact our law firm, come sit down with us for a discussion, and to ask any questions about your particular needs, how best to handle your finances during the divorce process and going forward.