The Impact of Divorce on Credit

It is common knowledge that divorce can be expensive. According to a recent survey by Experian, the average American loses about $20,000 in cash and other assets as a result of divorce. Many of these expenses stem from finding a new place to live and potentially having to make payments on two dwellings at once. Other divorce expenses include temporary alimony and child support orders, legal fees, and the need to hire outside professionals to complete the divorce process. Over time, these expenses can add up, leaving many individuals feeling broke by the time their divorce is finalized.

For many newly-divorced individuals, the financial consequences of divorce are two-fold. In addition to the extra money spent during divorce, many also experience a drop in their credit score. This occurs for a few reasons.

During the divorce process, stress and tight 􀃒nances can force individuals to make 􀃒nancially risky decisions.

Another reason is that married couples are jointly liable for any debt incurred during their marriages. When acouple divorces, these debts are divided alongside their assets.

Protecting Your Credit During Divorce

While your divorce is pending, many small expenses will come up. You might need to hire a babysitter for your children while you attend a meeting with your lawyer. You might need to miss a few days at work to go to court. On top of this, you may be struggling to adjust to living with only one salary if you were used to having two to help provide for your daily living expenses. This can put a further strain on you and force you to live on credit. If you take this route, pay of all your credit card bills in full and on time. If you cannot pay your bills in full, pay as much as you can to avoid compounding interest in following months.

Your credit score is calculated by examining your payment history, the length of your credit history, the type of credit used, the amount of money you currently owe, and any new credit line you obtain. By closing your joint credit accounts and opening new accounts, you can potentially damage your credit score. It is highly recommended that you seek the advice of an experienced New Jersey divorce lawyer before making any big changes to your finances.

Debt Liability

All debts incurred during a marriage may be considered marital debt, which means that both parties are liable for the debt. Exceptions include debts listed in a prenuptial agreement, stating that the debt belongs only to the partner who incurred it. Without these provisions, you can potentially find yourself facing steep debt for your partner’s college education, shopping or gambling habits, medical bills, or other expenses after your divorce. Talk to your lawyer about seeking innocent spouse relief through the IRS, which can release you from the liability.

If you have shared debt with your former partner, work with them to pay down the debt together. One way to do this is to share the login information for the online account so you can both monitor it and make payments as necessary.

Cherry Hill Divorce Lawyer Richard C. Klein Helps Clients Avoid Credit Damage During Divorce

If you are considering filing for divorce, take steps early to protect your financial future. Contact an experienced Cherry Hill divorce attorney who can help you work through all aspects of your divorce, including protecting your credit. Complete our on-line contact form or call 856-544-9155 to set up your initial consultation. Our office is located in Marlton, New Jersey, where we work with clients throughout South Jersey.