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
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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Basic Principles of Law for Construing Separation Agreements
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