Ending a relationship with someone is never easy, and it may take many people a great deal of time to emotionally come to terms with the break-up. When couples are involved financially, time may not be a luxury they have when it comes to dividing their assets. Settling accounts, deciding who gets the house or apartment and dividing up assets can be trying, but putting it off can leave both parties in a strained financial position. Therefore, it’s important that couples put aside their differences to develop a plan that will protect their interests.
Making a list of jointly held assets and liabilities is the first step individuals should take. This includes property, leases, credit card and bank accounts and investments. Knowing what is owned together and what individuals hold separately can give individuals more insight into whether they stand on a personal level. Former partners will then need to decide how to go about dividing up and closing joint accounts. Couples may know how much they each put into a checking or savings fund, which can make allocating the money simpler. If not, speaking with a mediator may be a good way to resolve disputes.
For jointly held credit cards, auto loans or mortgages, however, it may be more complicated. Credit card debt that is listed in both individuals names will need to be paid off in full before the cards can be closed. Failing to do so will impact both borrowers’ credit scores equally, so it’s imperative to develop a repayment plan. When it comes to a mortgage or loan, it may be difficult to sever these accounts, meaning that one person may need to agree to take over the obligation or sell the asset to clear the debt.
Getting personal finances back on track
During the break-up period, it’s important that each party pay their respective bills and avoid unnecessary spending. Learning to live on one income rather than two can be an adjustment, so individuals should save all the cash they can and keep it readily accessible for housing, transportation and living costs. If one person is significantly worse off than the other, consulting a credit counselor to help formulate a budgeting plan is a wise idea.
Lastly, individuals who were in a long-term relationship may have made key changes to insurance, beneficiary and other legal documents to include their significant other. Policyholders may rarely look at this information, which can make it easy to forget that a previous partner is still listed on the plan. After a big life change, consumers should always review their legal documents to ensure all the information is up to date.