Don’t Overlook Debt and Credit Rating Issues
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
Separation Agreement Software
Resources & Tools
DIVORCE AND LIVING EXPENSES – The parents must consider the cost of living, including extracurricular activities and daycare and even transportation. Some state courts allow these expenses to be negotiated into the amount of child support paid.
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Basic Principles of Law for Construing Separation Agreements
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