Getting a divorce can be emotionally and mentally trying on spouses, and the last thing divorcing couples may want to think about is their finances during this period. But divorce proceedings can also result in debt and financial hardship for respective parties, making it important to pay close attention to the small details.
Couples who hold mortgages and auto loans together will have to work with their attorneys or mediators to determine who gets what. Before accepting assets or a settlement, it’s important that individuals make sure they can truly afford them. Mortgage payments and auto loans can take a bite out of an individual’s single income, so weighing these new costs against other obligations is imperative. Experts advise homeowners against taking on a mortgage that cuts into more than 28 percent of their take-home pay.
But the tricky part comes when settling joint credit card accounts. Both partners will be equally responsible for paying off the balance in full before closing the account, CBS MoneyWatch reports. For this reason, it’s important to stay on top of payments and make sure the other partner is doing his or her part to avoid credit score damage and fees. Before severing accounts, most experts recommend that each person obtain a credit card in their name to begin rebuilding credit. A good credit history will be vital to newly-divorced individuals when it comes to securing housing, lines of credit and insurance.
In addition to paying off existing credit card debt, it’s important to weigh in other costs that may arise from a divorce. Individuals will have to cover the expense of finding a new home or apartment, purchasing a car, buying furniture and covering basic living needs. Going from a double income to a single income can be challenging, and some individuals may have to take on some credit in order to meet their needs. Taking on the bare minimum until they get accustomed to their new income level can help individuals avoid running up overwhelming balances.
During this pivotal life event, working with a financial professional or credit counselor is strongly encouraged. These services can help newly-divorced individuals establish debt repayment plans to cover their credit card bills. In addition, counseling services can also provide budgeting, money management and credit health resources for those acclimating to new financial circumstances.