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After the Divorce: Fail to Plan and Your Ex's Financial Decisions Could Still Affect You
This article provides tips on how to free yourself from your ex and any poor financial decisions he/she might make down the road.
You made it! You survived your divorce! But wait - there's more!
Whether you initiated the breakup or your ex did, once a judge legally dissolves your marriage, there are still a few things you must do quickly if you didn't take care of them before your divorce was finalized. The simple matter is that if you don't plan carefully, notify the proper organizations about your change in marital status, and remove your name from any joint accounts, you may end up in a financial mess with creditors calling 24/7, demanding payment on bills your ex racked up - or, worse yet, with creditors coming after your hard-earned assets to cover your ex's debts.
Consider the following scenario: Your ex purchases a flat-screen TV using a credit card you held jointly (but failed to close) and then cannot repay the debt. Guess who could be liable? That's right. You!
Or, try this scenario. Your ex remains in the home for which you shared joint title and a mortgage. But oops! Your name is unfortunately still on the title when your ex repeatedly fails to pay the mortgage on time. Guess whose credit score could head downhill and guess who's going to suffer the next time you need credit. That's right. You!
Divorce is bad enough, even when it's what both partners want. So don't make it even worse by failing to protect your current and future assets because you're still financially tied to your ex. Here are some tips for how to free yourself from your ex for good.
Your divorce decree should outline which partner will retain the house. Once that's determined, change all related mortgage, title, and insurance documents immediately by calling each bank or other appropriate business. Find out what you need to make the switch and to ensure the house is properly linked to the right person.
Your Credit Report
If you didn't already do this prior to your divorce, request a copy of your free credit report. Once you receive it, review the document carefully to identify and correct any inconsistencies immediately.
Next, look for any joint accounts you might not remember having and close them immediately. Think about the home-furnishings store credit card you accepted in exchange for an additional 10% savings when you purchased a washer and dryer or the electronics store credit card you and your ex obtained when you bought a computer. Those infrequently used accounts may still be open and on your report, even if you're not actively making charges on them. Get rid of them.
Your Joint Credit Cards
While it's best to escape your divorce without any joint debt, that may not be possible in today's hardened economy. Again, your divorcee decree should outline how you and your ex will pay off any existing credit card balances. Start paying off those bills with the highest interest rates first. Where appropriate and feasible, consider tapping into savings to pay off joint bills.
Next, you don't want to hold any joint credit cards with your ex. The reasons for this are simple: you don't want your ex to incur any new debt that you may potentially assume responsibility for if your ex chooses not to or is unable to repay that debt.
Therefore, contact your creditors and ask them to freeze any new purchases on your joint accounts while you work with your ex to settle any open debts. Your goal is to close and cancel any joint accounts as soon as possible. Also, ask the card companies to report to the credit bureaus that you wanted to close each account to so as not to negatively impact your credit score.
Next, if you've never held a credit card solely in your own name, apply for one and start building a positive credit history of your own. This link will help you identify the right card for your needs.
Your Joint Bank Accounts
Your divorce settlement should have addressed how your financial assets will be divided. Along those lines, close any joint accounts and establish savings and checking accounts in your own name. Your local bank can help identify the right type of account(s) for your needs.
Your Jointly Titled Automobiles
If your divorce decree mandates the transfer of title, make sure that happens. Along those lines, make any necessary changes to your auto insurance policy, recognizing the shift in title.
Your Federal and State Taxes
If the April 15 tax deadline is approaching and you were still married on December 31 of the previous year, you may want to consider filing your returns jointly if you can work cooperatively with your ex. Doing so may save you both from owing Uncle Sam too much or may provide you with a larger refund.
Also, remember that the Internal Revenue Service can audit previously filed joint returns. Make sure you properly organize any documentation you may need in the event of an audit. The IRS website also features a document to help divorced taxpayers remit their taxes. [At the time of this writing, this document focused on 2009 tax filings. A more recent version may be available.] Also, consult a tax advisor for details on your unique situation.
Lastly, if you're a woman who took your husband's family name when you married, consider returning to your maiden name during the divorce process. Be sure you change your name on all important documents (e.g., driver's license, passport, life insurance, will, Social Security, etc.).
As a final piece of advice, just as you likely didn't enter into the idea of divorce lightly, take a similar approach with your finances. The suggestions listed above are starting points only. It's certainly advisable to meet with a certified financial planner who is knowledgeable in the area of divorce.
With the proper planning, and continued efforts to keep working and keep saving, you'll be on the right path to being a successful single.
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