Don’t Overlook Debt and Credit Rating Issues
Key Points
  • Having bad credit due to the divorce can hurt you when trying to purchase a car, or home or even when trying to rent an apartment.
  • Make sure you know what your credit score is and that your credit report is accurate.

No one wants to start over with bad credit. Several steps can be taken during the divorce process to minimize the chances of this occurring.

The parties should obtain a copy of their credit report. This will identify all joint accounts, accounts one party may not know about, and any potential credit problems.

If possible, the spouses should pay off and close all joint accounts prior to the divorce settlement and open new accounts, each in his or her own name. Unfortunately, creditors don't care how a separation agreement divides responsibility for joint debt (joint credit cards, auto loans). Each person is liable for the full amount of debt until the balance is paid, hence the importance of dealing with this issue prior to a divorce.

Regarding income tax debt, even if the divorce is final, a former spouse may not be exempt from future tax liability. For three years after the divorce, the I.R.S. can perform a random audit of a divorced couple's joint tax return. If it has good cause, the I.R.S. can question a joint return for seven years.

A divorce agreement should have provisions that spell out what happens if any additional penalties, interest, or taxes are found as well as where the funds come from to pay for any expenses associated with an audit.

Useful Online Tools
  • Negotiating Your Divorce Online - You will be surprised how easy it is to resolve your disputes through our innovative Divorce Negotiation CenterTM. It's FREE. Give it a try.

Separation Agreement Software
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Separation Agreement Software
It is very difficult to move on with your life without getting the facts in writing, like, who gets what property and who is responsible for what debt, so a separation agreement outlines the rules in a legally binding format. Once you have a signed separation agreement you are on the right path to successfully negotiating your divorce settlement.

Suggested Reading
Fairshare Divorce for Women Fairshare Divorce for Women
Fair Share Divorce for Women is the first book that gives women the support and guidance they need to safeguard their marital assets. Too often women find themselves at a disadvantage when their marriage ends and they have to fight for what is rightfully theirs.

Author: Kathleen Miller, CFP, MBA

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GETTING STARTED -- In most divorces, one spouse wants out and one does not -- at least at the onset. The person who is left may try to stall, sometimes in hope of a reunification, but as the divorce progresses, he or she moves toward the point where both spouses understand the marriage is over.
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Featured Download Basic Principles of Law for Construing Separation Agreements

Basic Principles of Law for Construing Separation Agreements

Basic Principles of Law for Construing Separation Agreements

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