Money and Finances Archives | Page 7 of 10 | Collaborative Law Institute

September 30, 2014

Potential divorce clients often ask, how much does a collaborative divorce cost? Great question, it differs with each case and is dependent on clients and their level of conflict regardless of process. The more conflict a couple brings to any divorce process the more expensive it will be. Bottom line, conflict is expensive. Butting heads together to argue positions vs. putting heads together to solve problems will always increase costs. In a collaborative divorce, we focus on putting heads together which should decrease costs. As a financial neutral in the collaborative process, I have given this cost question serious thought. I wrestle with how you define cost. Do we measure cost only in terms of dollars and cents or is there something beyond the almighty dollar? I think the latter. I remember a couple who owned a business that I worked with in a collaborative divorce. By simply suggesting an alternative to using retirement fund money (client plan) to pay off a rather large debt, I was able to save them about $9,000 in income taxes. I seriously doubt anyone other than a well-trained financial professional would have noticed this. What about the cost savings of better-adjusted children of divorce because of their parents taking a higher road with less tension and conflict allowing both parents to effectively co-parent to create and environment where children are not placed in the middle of parental conflict? What about the cost of the stress and delays that typically occur with a traditional court based divorce? How do you place a number on the cost of destroyed relationships with spouses, children, extended family members such as in-laws and friends? How can one put a dollar value on these? Theoretically, a collaborative divorce should cost less. Attorney involvement in a collaborative divorce is typically less than in a traditional court based model. This occurs since other professionals, usually at lower hourly rates, provide many services historically provided by attorneys. Some attorneys choose not to become collaborative divorce practitioners because of this. Some traditional court based attorneys will say they do not believe that it is in the best interest of their client to have to withdraw from representing their client if the case does not settle in the collaborative process. The withdrawal provision if a case should go to court, is a key feature of collaborative divorce because it places everyone’s focus and interests, attorneys and clients, on finding solutions that take into account the highest priorities of both spouses and their children instead of arguing positions ad infinitum. This committed agreement for attorneys and clients to settle is, in my opinion, a good thing for divorcing spouses. It helps provide the framework for a less costly divorce and as I said earlier, I am not talking only about money. One of my goals working with couples or individuals is to reduce their divorce costs whenever and wherever we can so the family can keep more of its hard-earned money. One very simple illustration of how a financial neutral helps lower costs is in gathering financial information necessary for any divorce. It works like this. The financial neutral gathers All the financial documents from the clients that attorneys will ultimately need such as ALL assets and liability account statements including bank and credit card statements, non-retirement investments and savings, pension and retirement accounts, real estate documents, business documents if any, tax returns, pay check stubs etc. The financial neutral then, organizes and presents all of this information to both attorneys. Contrast this with each client having to provide all of this information to each of their attorneys. Attorneys usually have the highest hourly rates. Rather than paying two attorneys the couple pays, one financial professional, to perform this function. This one-step in the process can easily save a couple up to two thousand dollars. When minor children are involved, a neutral child specialist will meet with the parents to help them create parenting plans that are in the best interest of the child. The child specialist usually conducts these meetings without an attorney present. A neutral coach, when engaged by a couple, meets with the clients without attorneys to facilitate communication plans throughout the divorce process and looking ahead in the couple’s relationship post divorce. The child specialist and neutral coaches typically have the lowest hourly rates in the process of all professionals. Sometimes clients choose not to hire a neutral coach. In my experience, having a coach on board can help decrease tension and improve communication between spouses during the process. Less tension and conflict should lead to lower cost and more importantly stronger relationships post divorce. Well, I really have not given you a definitive answer on how much a collaborative divorce costs, because I cannot. Every couple and family is unique. Couples themselves determine, often unconsciously, how much their divorce will cost. Cost is directly a function of the level of conflict they bring into and maintain throughout the process. Ultimately, I think it boils down to what the couple wants. If they want a largely attorney driven process and someone else to make decisions for them about their children and their future then perhaps the more traditional court based process is for them. If on the other hand the couple wants to have less attorney involvement, make decisions for themselves and their children instead of someone else deciding then a collaborative divorce may be a better choice. If I could leave you with anything from this post, it would be to remember theoretically a collaborative divorce should cost less and that cost is more than just money. You control your journey and your destination. Choose wisely.

September 16, 2014

The kids might not be the only ones headed back to school this fall. Divorce forces many parents back into the workforce, and for some, even back to school. Divorce can initiate some dramatic changes in your lifestyle, and it make you re-evaluate yourself and your career. Some former stay at home parents are now looking for an enriching way to increase earning potential by going back for a degree they never finished, for a new degree, or for some it may be their first time in college. Divorce forces many people to take a risk, to do something for their selves, to strive for personal growth and to set goals, which is why many decide going back to school is a good option for them. When evaluating if going back to school is the right option for you consider that your goals are: Are you hoping to begin a new career? Advance in your current career? How long will it take? What will you be able to earn when you are finished? Consider the cost: Ask your attorney about whether continuing your education post-divorce will affect your spousal maintenance. Check with your employer to see if they cover any of the cost. Discuss your financial situation at the college’s Financial Aid office to see if you may qualify for any grants or scholarships, and of course, compare tuition amounts for schools in your area. Typically called, “non-traditional students” divorcees, over 35, and typically women, make up a good percentage for the student population at community, private, and online colleges, which usually offer flexible schedules and work at your own pace credit loads to graduate. It is not easy taking a risk and making a big commitment to go back to school, but if you decide that going back to school post-divorce is for you, rest assured that you are not alone.

September 15, 2014

How to provide financially for children after divorce has been a much-discussed topic for decades. Courts have traditionally used child support guidelines established by state government to calculate a monthly payment from one parent to the other. The Minnesota guideline child support calculator incorporates a number of variables, including both parents’ incomes, number of children, parenting time percentages, and children’s medical and day care costs, in arriving at a monthly payment amount. While statutory formulas produce a number, they don’t always resolve the issue. Many unanswered questions may remain, such as: “Is summer camp included in my child support payment?” “Do I have to contribute toward dance lessons on top of my child support?” “Our child needs private tutoring … does my ex have to pay half?” “Who pays for hockey equipment and ice time?” Ambiguity often results in conflict. Some couples return to court again and again to try to resolve questions like these. The emotional and financial costs of repeated court appearances add up in a hurry. The Collaborative divorce process takes a different approach toward paying the children’s direct and indirect expenses. Parents compile a list of their kids’ direct expenses (clothing, haircuts, school lunches, daycare, summer camps, extracurricular activities, etc.) and then discuss options for paying these expenses. Some couples decide to fund a joint children’s account to be used solely for enumerated expenses. Others divide the expenses with mom paying some and dad paying some. Others decide to use the guideline calculator, spelling out how any additional expenses will be covered. Indirect expenses (housing and food) are included in each parent’s budget and are usually part of a more general discussion about support. Collaborative support agreements typically include periodic reviews allowing for adjustments as parents’ incomes and the children’s needs change. Plans like these can preemptively avoid repeated unpleasant discussions in the years following divorce. If you are interested in learning more about the Collaborative process, please visit The Collaborative Law Institute of Minnesota’s website.

August 20, 2014

Cash flow refers to how your money moves in your household, from the time it is received to when it is spent. When your cash flow is “positive,” it means you have more money coming in than going out; you are spending less than you take in each month. You want positive cash flow in order to pay for expenses and also save and invest money for goals. After a divorce, however, you may find your cash flow is tight or even negative. That is, you are spending your cash almost to zero each month or spending even more than you take into the household. To improve your cash flow, here are several steps to take: 1. List all your sources of income. Your income could include any of the following:

Spousal maintenance/alimony
Child support
Part-time and full-time wages, bonuses and commissions
Self-employed income
Rental income
Royalties
Investment income
Pensions or draws from retirement accounts

Different sources of income are taxed differently, so you need to know your true after-tax income. Consult a CPA or financial advisor to learn more about this. You’ll also need to know how often you receive each source of income and if it’s fixed/guaranteed (paychecks) or variable (self-employment income). 2. Determine your historical monthly spending. Look back 6-12 months to get an accurate picture of expenses. This could include everything from car or home maintenance to vacations, kids’ sports activities or insurance premiums. Look up spending summaries on your Quicken account or request statements from your bank or credit card companies. Don’t make yourself crazy trying to document every expense to the penny. Just come up with a monthly average per expenditure (e.g. $1,000 on holiday gifts averages out to about $83 a month). Reviewing your spending habits can be a valuable exercise. You’ll likely see areas where you could realistically cut spending in order to improve your cash flow. 3. Decide if positive cash flow requires more income or less spending – or both! There are only two ways to improve cash flow: increase your income or reduce spending. You can increase income by finding a job, increasing the hours you work or finding a different job with a better salary. You could also consider returning to school to train for a better-paying job. Temporary jobs, such as retail during the holiday season, can also provide a cash cushion to meet immediate or pressing needs. If you are already working as much as you can, then look for ways to cut spending. Divide your expenses into fixed expenses (like rent or mortgage), escrow expenses (such as insurance or taxes), and living expenses (groceries, haircuts, school expenses). It is often in the living expenses category that you can find areas to cut — at least short term — in order to create a more workable budget and money habits. Keep going back to this list and making cuts until your budget is less than your income. If you are in the habit of using credit cards as your cash overflow account and aren’t paying off the balance each month, this is another sign that you may not have positive cash flow. Stop using credit for any living expenses and give yourself a cash allowance instead. You will quickly assess needs and wants by looking at the remaining cash in your wallet as the weeks go by. Be gentle with yourself. A new cash flow system takes 30 to 90 days to start showing positive results. Staying in a budget takes practice, but can become fun as you have more money to save for vacation or that retirement dream.

August 18, 2014

In Part I of Getting Unmarried, Money and Divorce, I talked about the two financial pillars of any divorce. The first being the balance sheet that lists every single asset and liability. The second being forward looking cash flow and support needs for children, if any, and both spouses. In this post, I will briefly cover some other financial issues common in many divorces. These include some discussion of marital and non-marital property, analyzing tax implications of various scenarios for child support and/or spousal maintenance; analyzing property and business interests, debt pay off scenarios, and comparing pros and cons of using one asset over another. A financial neutral assists with identifying what is marital and what is non-marital property. Marital property of course is that property acquired during the marriage. Generally, non-marital property is property owned prior to the marriage and brought into the marriage, inherited property, and or property received as a gift. Sometimes this can include a home where the down payment made with non-marital money, a retirement plan when the participant contributed to the plan prior to and during the marriage, or more simply a family heirloom passed down through the generations. Non- marital property generally remains with the receiver of the property and not considered in the allocation of marital property. When there is both marital and non-marital interest in an asset, a financial neutral can help determine the values of both the marital and non-marital interests. The tax implications for child support and spousal maintenance are different. Child support is not taxable income to the payee and is not deductible by the payer. Spousal maintenance on the other hand is taxable income to the payee and is deductible by the payer in most situations. A qualified financial neutral is able to help a couple determine an optimal combination of child support and spousal maintenance in order to provide the greatest amount of after tax income to the family. When a couple or one of the spouses owns a business, it is often helpful to determine the business value. If needed a specially trained neutral business valuation expert is engaged to provide this service. These trained experts employ a variety of valuation methodologies to provide an opinion as to the value of a particular business. Depending upon the complexities of the business the time and cost to complete a business valuation can vary. Debts are another financial area where clients can benefit from the insight of a qualified financial neutral. Facilitating how to allocate debt between two spouses is an important function of the financial neutral. The neutral may suggest the clients consider a number of options available including the potential of reducing or paying off debt with other assets. This can help a couple breathe a little easier when freeing up needed cash flow for living expenses by not continuing to carry current levels of debt. A well-trained neutral financial specialist helps divorcing clients see the big picture pros and cons of making a number of financial moves during settlement discussions. Clients are then able to make informed educated decisions concerning their financial future. The financial neutral is family centered in the collaborative process and makes every effort to assist divorcing clients reach agreements they both can live with. Only in the collaborative divorce process are clients able to achieve this level of client introspection and decision-making. Collaborative divorce is not for everyone. Is a collaborative divorce process right for you or someone you know? Click on this link to learn more and decide for yourself. www.collaborativelaw.org

July 30, 2014

In my last post “Getting Unmarried: Gray Divorces” I wrote about the increasing number of divorces for those over the age of fifty. Also of note was how Gray Divorces have many of the same foundational issues as any divorce although there are some distinct differences. Regardless of the issues, a trained financial neutral plays a critical role in the collaborative process. Money matters can be a bed rock of tension in divorce cases. Financial issues are often cited as a major reason for marriage breakups. A financial neutral assists couples in navigating their finances. They help with the two major financial components in divorce. One is the balance sheet (list of all assets and liabilities), and two the cash flow and support. So what does a financial neutral actually do you ask. First and foremost a financial neutral is just that – an impartial expert on financial issues. They remain unattached to any particular outcome. A good financial neutral can be worth their weight in gold when it comes to helping couples navigate money issues in divorce. Financial neutrals help a couple gather and identify the financial information needed. I often hear from spouses the detail involved in gathering the financial information is something they have never experienced. The reason for this is all assets and liabilities, each and every one, is separately noted in the final decree so as to leave no doubt who gets what and who is responsible for what. Independent third party written documentation is needed to support each asset and liability. This information gathering is a part of the process that can’t be short circuited. Having said this, when information gathering is completed by a financial neutral it can save spouses a considerable sum. Think about it. You are paying one professional, the financial neutral, to complete this process vs. each spouse providing the same information to each of their attorneys who in a non-collaborative divorce will have to review and assimilate all the information provided, ask questions of their clients, and then likely have to converse with the other spouse’s attorney. Financial neutrals can assimilate and organize this information in a streamlined manner with the couple’s cooperation. Usually financial neutral hourly rates are less and sometimes significantly less than attorney rates. Once all financial information is collected and organized the financial neutral creates a marital balance sheet listing each and every asset and liability. The marital balance sheet forms the basis for discussion as to how each asset and liability is allocated between spouses. In the collaborative divorce process, couples make their own decisions about asset and liability allocations to each spouse. Couples must ultimately reach agreements on the balance sheet. The financial neutral along with each spouse’s attorney helps facilitate these discussions. The alternative in more traditional litigated divorce cases is someone else, a judge, makes decisions for the couple since they are not able to agree on their own. Financial neutrals help spouse’s asses their ability to meet their reasonable living expenses (cash flow). This part of the process includes analyzing income sources and estimating future living expenses. Generally spouses are asked to complete some sort of budget template. In my experience both as a financial neutral and a financial planner, I find most people do not care for the term budget. I do a fair amount of public speaking and when I ask people what they think of when they hear the word budget it usually has a negative impression like restrictive or confining. I have attempted to remove the word budget from my vocabulary as a result and replaced it with cash flow or spending guide. Budgets tend to be backward looking while the words cash flow and spending guide are future oriented. Assessing income and expenses (cash flow) provides each spouse with a realistic look at their financial security moving forward. Financial security is the number one goal I hear that each spouse wants to achieve. No one has ever told me they want financial insecurity. A realistic look at cash flow for each spouse is critical to providing the financial security they seek. Here is a phrase I have used when having cash flow discussions. If your outgo is greater than your income, then your upkeep may be your downfall. Think about that for a moment. Better yet remember it, as it will serve you well no matter your financial stage in life. Yes the balance sheet with its listing of all assets and liabilities and the cash flow and support pieces form the two financial pillars of every divorce. Sometimes the financial issues can become very emotionally charged. A well-trained experienced collaborative financial professional along with the help of other collaborative team members can help keep spouses on track. I encourage couples to the extent possible to look at these decisions as business decisions. It’s easier said than done but in the end it usually is a business decision. I am a firm believer that each spouse and their family are far more important than any numbers on a balance sheet or cash flow report. In my book and in my work people always come first before numbers. There are other important financial issues a financial neutral can assist with. Watch for part II of “Getting Unmarried: Money and Divorce”. There I will talk about marital and non-marital property, analyzing tax implications of various scenarios for child support and/or spousal maintenance; analyzing property and business interests, debt pay off scenarios, and comparing pros and cons of using one asset over another. Is a collaborative divorce process right for you? If you or someone you know may be looking for a divorce alternative without court click on this link to learn more: www.collaborativelaw.org.

July 23, 2014

Spousal maintenance/alimony
Child support
Part-time and full-time wages, bonuses and commissions
Self-employed income
Rental income
Royalties
Investment income
Pensions or draws from retirement accounts

July 9, 2014

In my last post “Getting Unmarried: Gray Divorces” I wrote about the increasing number of divorces for those over the age of fifty. Also of note was how Gray Divorces have many of the same foundational issues as any divorce although there are some distinct differences. Regardless of the issues, a trained financial neutral plays a critical role in the collaborative process. Money matters can be a bed rock of tension in divorce cases. Financial issues are often cited as a major reason for marriage breakups. A financial neutral assists couples in navigating their finances. They help with the two major financial components in divorce. One is the balance sheet (list of all assets and liabilities), and two the cash flow and support. So what does a financial neutral actually do you ask. First and foremost a financial neutral is just that – an impartial expert on financial issues. They remain unattached to any particular outcome. A good financial neutral can be worth their weight in gold when it comes to helping couples navigate money issues in divorce. Financial neutrals help a couple gather and identify the financial information needed. I often hear from spouses the detail involved in gathering the financial information is something they have never experienced. The reason for this is all assets and liabilities, each and every one, is separately noted in the final decree so as to leave no doubt who gets what and who is responsible for what. Independent third party written documentation is needed to support each asset and liability. This information gathering is a part of the process that can’t be short circuited. Having said this, when information gathering is completed by a financial neutral it can save spouses a considerable sum. Think about it. You are paying one professional, the financial neutral, to complete this process vs. each spouse providing the same information to each of their attorneys who in a non-collaborative divorce will have to review and assimilate all the information provided, ask questions of their clients, and then likely have to converse with the other spouse’s attorney. Financial neutrals can assimilate and organize this information in a streamlined manner with the couple’s cooperation. Usually financial neutral hourly rates are less and sometimes significantly less than attorney rates. Once all financial information is collected and organized the financial neutral creates a marital balance sheet listing each and every asset and liability. The marital balance sheet forms the basis for discussion as to how each asset and liability is allocated between spouses. In the collaborative divorce process, couples make their own decisions about asset and liability allocations to each spouse. Couples must ultimately reach agreements on the balance sheet. The financial neutral along with each spouse’s attorney helps facilitate these discussions. The alternative in more traditional litigated divorce cases is someone else, a judge, makes decisions for the couple since they are not able to agree on their own. Financial neutrals help spouse’s asses their ability to meet their reasonable living expenses (cash flow). This part of the process includes analyzing income sources and estimating future living expenses. Generally spouses are asked to complete some sort of budget template. In my experience both as a financial neutral and a financial planner, I find most people do not care for the term budget. I do a fair amount of public speaking and when I ask people what they think of when they hear the word budget it usually has a negative impression like restrictive or confining. I have attempted to remove the word budget from my vocabulary as a result and replaced it with cash flow or spending guide. Budgets tend to be backward looking while the words cash flow and spending guide are future oriented. Assessing income and expenses (cash flow) provides each spouse with a realistic look at their financial security moving forward. Financial security is the number one goal I hear that each spouse wants to achieve. No one has ever told me they want financial insecurity. A realistic look at cash flow for each spouse is critical to providing the financial security they seek. Here is a phrase I have used when having cash flow discussions. If your outgo is greater than your income, then your upkeep may be your downfall. Think about that for a moment. Better yet remember it, as it will serve you well no matter your financial stage in life. Yes the balance sheet with its listing of all assets and liabilities and the cash flow and support pieces form the two financial pillars of every divorce. Sometimes the financial issues can become very emotionally charged. A well-trained experienced collaborative financial professional along with the help of other collaborative team members can help keep spouses on track. I encourage couples to the extent possible to look at these decisions as business decisions. It’s easier said than done but in the end it usually is a business decision. I am a firm believer that each spouse and their family are far more important than any numbers on a balance sheet or cash flow report. In my book and in my work people always come first before numbers. There are other important financial issues a financial neutral can assist with. Watch for part II of “Getting Unmarried: Money and Divorce.” There I will talk about marital and non-marital property, analyzing tax implications of various scenarios for child support and/or spousal maintenance; analyzing property and business interests, debt pay off scenarios, and comparing pros and cons of using one asset over another. Is a collaborative divorce process right for you? If you or someone you know may be looking for a divorce alternative without court click on this link to learn more: www.collaborativelaw.org

June 17, 2014

According to a Bowling Green State University study, the divorce rate for those over 50 more than doubled between 1990 and 2009. The trend suggests that by 2030 there will be more than 800,000 divorces per year for the 50 plus age group. This unprecedented rise in gray divorces is occurring while the divorce rate among younger couples is declining.

I will not be a year 2030 statistic. My divorce was final in 2010 after a 32-year marriage, which most definitely puts me in that age 50 plus boomer group. While the Bowling Green study and an endless amount of other research discusses some of the reasons and causes for this divorce demographic, I want to focus on how the issues are different for gray divorces and yet the same as those divorcing at much younger ages. In my experience, working with spouses as a financial neutral every divorce is unique to each family. However, all divorces have some broad common foundational issues. Every divorce, whether you are in your 50’s and above or younger, has at least some financial issues to be resolved. Divorce financial issues involve allocating assets and liabilities to each spouse in an effort to be fair and equitable. In addition if there are children under the age of 18 providing for the needs of the children is a consideration. In certain situations, spousal maintenance may come into the play. What is different about financial issues in gray divorces is hypothetically; there are greater assets and fewer liabilities given their longer life and time in the workforce up to this point than their younger counterparts. In my work as a financial neutral with gray divorcees, I can share with you this is not always the case. Many times assets are limited and debts are significant. A collaborative-trained financial neutral is well equipped to help spouses with these and other financial issues. There is less time for boomer spouses to recover from the financial loss of divorce. Essentially assets and debts are allocated equally with some exceptions that have the effect of reducing the marital estate in half. Sometimes mothers or fathers have stayed at home or otherwise sacrificed to some degree a working career to care for their children. Now in their 50’s and above they will need to do what they can to work towards becoming self-supporting. This is no small order, as we all know how difficult the job market can be for anyone let alone trying to re enter the workforce when you are gray and training and skills may need to be updated. When there are children under the age of 18 a parenting plan must be established. Parents ideally come to agreements on how to co-parent their minor children. This is not to imply that children older than 18 are not affected by divorce. My children were all adults over the age of 21 when my divorce occurred and I can share the divorce had an impact on their lives as well as mine and my former spouse. While child support financial obligations and parenting time schedules may not be a factor in gray divorces, those adult children need the support of both parents. Gray divorcing clients would do well to consider the support their adult children need. After all, there will still be birthdays, holidays, weddings, graduations, and yes-even grandchildren in the future. Your children regardless of their age want to know they have two loving and caring parents who will always be there for them. With gray divorces, there are often decade’s long relationships with extended family members. What will these relationships look like in the future? Will the relationships continue to exist or somehow change a result of the divorce? How will what happens to these relationships affect your adult children? All of these and many more questions arise in gray divorces. Divorce, regardless of age, is never easy nor does it produce any winners in my opinion. However, those who have made the decision to end their marriage would be wise to become knowledgeable of the collaborative divorce process. Collaborative Divorce is well suited to handle gray divorces. This process when successfully completed keeps your divorce out of court and thus keeps it private. More importantly, it keeps the outcome in your control. You and your spouse are able to make decisions about your future not a judge with limited information and time. Collaborative divorce is a process that involves dignity, respect, and acknowledges the contributions of each spouse to their marriage. If you know of anyone who has made the decision to divorce or is seriously considering divorce you would be doing them a favor by letting them know that collaborative divorce is an option and where they can go for more information. To learn more about collaborative divorce visit www.collaborativelaw.org.

June 10, 2014

A divorce can impact your ability to secure credit simply because you may no longer have the income you had when you were married. Here are five tips to maintain a good credit score and protect it for the future. 1. Know your credit score and what affects it. Your credit score report can be obtained for free (just one per year) through one of three credit bureaus: Equifax, Experian or TransUnion. Your score is determined by your payment history, outstanding balances, history of using credit, the type of credit used and how many inquiries into your credit happen throughout the year. Keep in mind that it’s good to have a credit card or other credit and to use it occasionally to maintain your access to future credit when needed for a car loan or mortgage, for example. If you had joint credit accounts with your spouse, your credit score may or may not need a little boost after the divorce based on the factors mentioned above. #2 Eliminate obligations where possible. A credit card or statement with your name on it does not make you a joint owner of the account. Unless the account was originally opened with an application signed by you, you may only be an authorized signer and you can request to have your name removed from the account immediately. If your former spouse is named on the account as an authorized signer, have his/her name removed to avoid any future charges. #3 Close joint accounts or freeze future charges. If there is no balance on a joint account, call the creditor and close the account, noting that this may temporarily affect your credit score. If you are in the process of applying for a loan, however, ask your lender if you should close joint accounts at that time or wait until you have the loan in place to avoid jeopardizing the loan. If there is a balance that cannot be paid off right away on a joint account, call the creditor and request to freeze the account from any future charges. You can pay off the balance over time without incurring additional debt. #4 Transfer balances to the responsible party’s individual card. For debt that you are not responsible for, request that your former spouse transfer the remaining balance to another credit card in just his/her name. If they are unable to pay their share of the debt, payments still need to be made so that the account doesn’t default and your credit score isn’t affected. Make sure that you are receiving copies of all statements by requesting duplicate copies. #5 Pay your bills on time, no matter what a judge says. Divorce decrees do not override account agreements with your creditors. Both spouses are liable and responsible for joint debt regardless of who the judge ordered to pay the bill. If accounts default, then both spouses can be sued or have their wages garnished. One 30-day late payment can drop your score 25-75 points and it takes months to get those points back. If you have trouble maintaining current accounts during or after your divorce, consider debt counseling to better manage your finances and preserve your credit score for the future.