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If you are facing divorce this, you need to take care to protect your credit.
Most people don’t know that court decrees assigning payment responsibilities for joint loans are not honored by lenders. This incorrect assumption of being off the hook for financial obligations can result in payments being missed and your credit score being tarnished for years. However, you can limit your exposure to this type of risk this if your credit is safeguarded before filing for divorce.
If you and your spouse have joint accounts, you should do your best to change them to individual accounts so that splitting up your financial responsibilities will be easier. This may or may not require your spouse’s cooperation. It will depend on how the debt is titled and on the requirements of the creditor. However, these steps can save years of credit woes in the future.
You should begin this process with your credit card accounts. Payments on credit card debt are the most often missed, as opposed to home and vehicle loans. Those loans are the second thing you should work on.
However, refinancing your mortgage and car loans will be more difficult, as banks or mortgage companies will likely require additional transaction costs to refinance the loan. Selling the car or house and splitting the money could be an easier method, which would guarantee a vengeful ex-spouse wouldn’t damage your credit.
Opting out of receiving pre-screened offers for credit or insurance is also advisable, as a former spouse could be tempted to apply for a loan in your name in order to ruin your credit.
Of course, this information is not specific legal advice for your own situation. Rather, it is general information. Before taking any action, you should discuss these issues with your lawyer.
World of Warcraft is a best-selling online role-playing game. It boasts over ten million subscribers; however it has apparently also left an increasing number of real life casualties in its wake, including a woman named Jocelyn.
Though she is not a player, the 28-year-old California native has divorced her husband of six years due to his development of what she describes as a “crippling addiction” to the game.
She claimed that shortly after he would come home from work at 6:00 p.m., he would begin playing until 3:00 a.m. She said that he was even worse on the weekends, when he would play from the morning until the middle of the night.
“I ceased to exist in his life,” she said.
Jocelyn and her ex-husband Peter had been friends since age 13. However, nine months was all it took for the marriage to fall apart.
She said she purchased the game as a Christmas present for him in 2004, when it first came out. They had their first serious discussion about the direction of the marriage in May of 2005. She moved out of the house by September 2005.
She also said her ex-husband failed to perform his domestic duties as well. She says that he was no longer paying his bills, nor doing his part of the housework.
She doesn’t hesitate to say that the game was the main reason the divorce took place and is still emotional about the impact it had on the marriage. She was upset that her husband would ruin his life and his marriage for “a fantasy land.”
This story was originally told at Yahoo Games and can be found at this link. Though it only includes one side of the story, if true, it is sad that a video game could cause the break up of a marriage. It reminds me of the title of a good book, Amusing Ourselves to Death. Or, in this case Amusing Ourselves to Divorce.
In your divorce case, you may hear your lawyer talk about the “discovery process.” Discovery is essentially the legal process by which lawyers can obtain information necessary for your case (such as assets, debts, income, and other factual information). This often will involve written requests to your spouse to produce certain documents, a request for them to file written answers to the lawyer’s written questions (called interrogatories), subpoenas for documents from banks, credit card companies, etc.
Often lawyers will use multiple methods of discovery in an effort to obtain complete information. I have had clients ask me not to pursue discovery for fear of the costs that would be incurred. This is often short sighted. An example from a recent case I had is instructive.
I was representing a wife in a divorce case. The husband had complete control of all of the finances and the wife was not even aware of all of the assets. Through the discovery we sent to the husband he produced a spreadsheet that he claimed were the assets. The wife was surprised at the amount of assets that were disclosed. They were much more than she thought they had. But, the husband showed what he claimed to be the fair market value and the loans owed on them. In all, he showed a net equity of less than $500,000. It was more than the wife suspected, but something told me it was less than it should be. So, we subpoenaed his bank records.
The bank produced documents to us that included the husband’s loan application and the net worth statement that he provided to the bank. And, you’ve probably guessed the punch line – the net worth statement he provided to the bank included assets that he had not disclosed on the financial statement he provided to us, and the values were higher. In all, the difference was that he showed a net worth on the financial statement provided to the bank that was nearly $2.5 million dollars – increasing the marital estate for the divorce judge to divide by about $2 million!
My client now understands it was to her benefit to make sure we did a thorough job of discovery. Obviously this example (though completely true) is not what usually happens – at least not to this degree. But, the lesson is a good one – make sure that your lawyer does a thorough job of discovery. And, make sure that you let him.
I recently came across this article from the USA Today which set out Five Common Financial Mistakes Made in Divorce.
Here is a summary of their points:
1. Trying to keep the house no matter the costs. Many couples scrambling to obtain a divorce settlement wish to keep the house at any cost. However, financial experts say that more attention should be given to who can afford to maintain the property, pay the mortgage, and manage the taxes. While it is possible to ask for spousal support to help make the mortgage payments, unexpected maintenance costs may pop up, and make home ownership more of a liability than a luxury.
2. Failing to get a clean financial break from your former spouse. Clean separation of assets and debts is another difficult task, but one that Howard Dvorkin, the founder of Consolidated Credit Counseling Services says is absolutely necessary, or the consequences can be devastating. Although the task may seem insurmountable, “the alternative is much worse,” says Dvorkin. “Having a spouse drive up your debt when you’re not married anymore” can seriously affect one’s credit score.
3. Depending on your former spouse to comply with financial arrangements. This is also a huge mistake, according to the USA Today article. Although both parties in a divorce are beholden to a court-ordered divorce agreement, creditors do not fall under that arrangement. If your ex spouse is supposed to pay the mortgage, but doesn’t, “the lender is going to sue both of you,” remarks Melissa Avery, an Indianapolis family law attorney. This holds true in Alabama divorces as well; if your ex fails to pay the mortgage, you may be hurt when applying for future loans.
4. Not reviewing your estate plan after a divorce. Wills and trusts can also be seriously impacted by divorce proceedings. If divorced spouses wait unnecessarily long to change a beneficiary on a will, for example, the money may go to the wrong person-your new spouse may get nothing, while your ex spouse inherits the amount provided for in your will.
5. Not understanding the different tax treatment of alimony vs. child support. Finally, never forget which amount of money in your divorce settlement is alimony, and which amount is child support. Whereas child support payments are not taxable to the recipient, alimony payments are. Furthermore, there are limits to how long a person can receive such payments-child support payments can no longer be received once the child turns 18 or is done with college, while spousal support generally ends once the recipient remarries.
Whenever you are going through divorce, it is important to maintain secure lines of communication with your lawyer. This is especially important in the early stages of representation, when you may not want to tip your hand to your spouse that the divorce is imminent.
Houston divorce lawyer, Shannon Cavers, recently posted an informative article on this subject here. Like Shannon, at the initial consultation we ask our clients for a spouse safe e-mail and mailing address. It is so simple to open a yahoo or hotmail e-mail account for free, that you should consider opening one for this purpose. In doing so, make sure that you use a password that they will not guess and that is unique to this account.
The Oklahoma Family Law Blog recently wrote an article in honor of father’s day that contained some Must Read Books for Divorced Dads. With a tip of the hat to Dan Nunley, the author of the article, here they are:
Following are four recommended books for fathers dealing with the difficult issues of divorce. Whether you’re in the initial stages of divorce, dealing with the immediate aftermath or well past one, these books will provide down-to-earth ideas and strategies you can use to remain an integral of your children’s lives.
Always Dad: Being a Great Father During & After Divorce by Paul Mandelstein, a divorced father of three and founder of the Father Resource Network.
More and more, divorced fathers are finding out that, rather than being one half of a “broken” home, they can continue to play a crucial role in their children’s lives. You can, too. Turn to Always Dad and discover how to work with your ex to create a fulfilling extended family, one that can help ensure that your kids grow up in an enriching, loving environment.
Live-Away Dads: Staying a Part of Your Children’s Lives When They Aren’t a Part of Your Home by William C. Klatte, a psychotherapist, social worker, and divorced father of two grown daughters who lived with their mother. Klatte begins by advising fathers to take care of themselves, including dealing with anger and depression, good advice for anyone coping with a major life change. He stresses the importance of staying involved with your children despite personal difficulties or the challenges of working with their mother. Later sections deal with cooperation, using the court system, developing parenting skills, and finding support groups.
The Divorced Dad’s Survival Book: How to Stay Connected With Your Kids by David Knox, a divorced father of two. With hands-on “get you through it” plans to help fathers remain positive, involved parents, and personal stories from a variety of home fronts, this invaluable guide illustrates how men can best develop their fathering skills, stay involved with their children, and honestly evaluate their own capabilities as fathers and ex-spouses.
I’ve just discovered Stephen Worrall’s Georgia Family Law Blog. Its a very good blog with a lot of great content, and its not all specific to the state of Georgia, so check it out.
Here is a post he recently made where he found a nice Divorce Checklist which contains a general list of issues that should be considered in resolving a divorce. The list includes:
1. Custodial arrangements for the children
2. Visitation/parenting time
3. Child support
4. Medical, dental, hospital, pharmaceutical, and psychological expenses for the children
5. COBRA or medical insurance for a former spouse for up to 3 years from the entry of the divorce judgement where applicable
6. Income tax exemptions regarding the children — who will claim them
7. Alimony/spousal support
8. Property division
9. Division of real estate, transfers, and deeds
10. Making sure that all investments are covered including limited partnerships, stocks, bonds, and savings
11. The handling of debts
12. Pensions, IRA accounts, 401K transfers, Qualified Domestic Relations Orders
13. Personal property including furniture, furnishings, art, and collectibles
14. Motor vehicles, including trailers and boats
15. Income taxes whether there can be joint filings and liabilities for payment of taxes
16. Bankruptcy issues, protection in case one spouse does go bankrupt
17. Proper security and protection regarding property division
18. Clauses to hold the other spouse harmless and indemnification in case someone fails to live up to his or her obligations
19. How to handle the discovery of hidden assets
20. Spouse abuse and restraining orders
21. Restoration of a prior maiden name
22. Life insurance policies as protection for child support payments, alimony/spousal support payments, and/or property payments in the event of death
23. Attorney fees and/or mediator, accountant, and other expert fees and payment of same
24. College education for children and/or spouse
25. Provisions for review in certain circumstances such as with regard to child support and/or spousal support.
26. Clauses such as payment for summer camps and/or religious training and/or upbringing or other special situations involving children
Today we will deviate from our normal protocol of posting practical divorce and family law information and instead report on a news story related to a recent divorce in Chicago.
The rather crass title of this post is the actual bumper sticker of a local divorce lawyer. But, in this story, the husband’s divorce wasn’t twenty grand – it was $184 million! It is reportedly the highest divorce award in history.
It reminds me of a New Yorker cartoon I once saw. In it a lawyer sits across from his female divorce client and tells her, “Some people say you can’t put a price on a wife’s 27 years of loyalty and devotion. They are wrong.” In this case, it was a high price indeed.
This post will be the first in a series that addresses the steps to take when it becomes apparent that a divorce may be imminent. Understand that I am not encouraging divorce. I am, however, encouraging you to protect your interests and make prudent preparations if a divorce is going to take place.
Step 1: Find a Wise Guide
An experienced divorce lawyer I know is fond of telling his clients that you don’t need a lawyer to get a divorce, but you need them for the consequences of your divorce. He is right. You can likely get a divorce by finding some forms on the internet or hiring a lawyer that advertises for cheap uncontested divorces. If you have no children, a marriage of only a year or two in duration, no assets or debts have been accumulated during the marriage, and you and your spouse agree on everything, then you probably don’t need a divorce specialist.
Look for a lawyer that has at least 5-10 years experience practicing primarily divorce and family law. Find out the lawyer’s philosophy regarding litigating cases versus settling them. My personal opinion is that you should want a lawyer who makes it a priority to attempt to acheive a fair settlement for you, but who is capable and willing to litigate the case before a judge.
Step 2: Make an accounting of the family finances
The next thing you will want to do is to gather as much information as you can in order to get a clear picture of your family’s financial situation. You may already have a firm handle on this, if you are the one that takes care of the finances in your home. On the other hand, you may have no idea what you and your spouse own or owe.
One of the primary functions of the divorce process is to make a division of the assets and debts of the marriage. In order to get a fair division, you must know what there is to divide.
This is a three step process:
A. Determine what you own.
B. Determine what you owe.
C. Determine income (both yours and your spouses).
I will cover each of these in more detail in subsequent, separate posts.