Tag Archive for: debt

The 4 Keys to Repairing Credit after Divorce

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If your credit has been damaged during your marriage, expect to take some time to repair it. The first step, of course, is to obtain a credit report. You can receive one free report each year from a free report agency, or check with your bank. Assess your situation and then make a plan of action. There are four key steps to repairing your credit: close current joint accounts, restructure your debt, develop a budget, and take positive steps to repair the damage.

Close

The first step is to close all joint accounts. Officially call the companies or banks and close the accounts. Some institutions may require your spouse to also call or sign. Make sure you document your efforts, and if your spouse delays, document that, too. Keep copies of statements in case your spouse decides to go on a wild shopping spree before closing the joint account. In settlement, the judge may award a larger portion of the debt to the spouse if there is clear evidence of an attempt to burden you with more debt.  Obviously, keep official proof that the account has been closed. If your spouse is handling this aspect, make sure you have copies as well.

Restructure

The joint debt remains the responsibility of both of you until it is paid off. Restructuring the debt by transferring a portion of the balance to an account in just your name or refinancing in some other way will separate the expenses – assuming your ex does this as well. If a portion of the debt remains in both your names, you will remain jointly responsible for it, at least until a clear judgment is made by the courts. So try, as much as possible, to get an agreement from your spouse to split the bills.

If you’re selling a house, you could use a portion of the sale to pay off any joint debt before distribution of the balance. This will leave a smaller payoff, of course, but will give you both a clean slate with which to start your new lives apart.

If the above options are not possible, try to split the responsibilities evenly, and get it in writing. For instance, if you offer to pay loan A and he or she is to pay loan B, get it in writing. If your ex doesn’t pay and the bill collectors come after you, you will have proof of divided responsibility and will be able to go to court for payment enforcement.

Budget

Now that you know how much you have to pay, take a close look at your income and expenses, including repaying debt. Create a budget and stick to it. If you don’t have much experience with budgeting, or if it looks like you don’t have enough income to cover your necessities, find a trustworthy credit counselor who can help you make good financial changes.

Repair

It’s time to open some accounts in your own name. If you changed your name when you married and you want to change it back, do so before opening the new accounts. If your credit is bad, you may need to open a secured card. With a secured card, you put forward a certain amount of money and then you are able to borrow against that money and pay it back at the end of each month. By paying bills on time over a period of months and by not taking out new loans for a while, your credit score will begin to improve. As it improves, you will be able to get a normal credit card, close the secured card, and get your down payment back.

When going through a divorce, it’s important to have a team to help you. Besides having moral support, choose trusted advisors for credit, tax, and legal advice. With financial and legal guidance and emotional support, you can get through this and be stronger on the other side.

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Do I need a Chapter 7 or Chapter 13 bankruptcy plan?

Consumers in Pennsylvania who are in need of debt relief assistance may benefit from filing for bankruptcy, but they should understand the two primary forms of consumer bankruptcy – Chapter 7 and Chapter 13 – to make the right decision for their needs.

When facing serious debt problems, many consumers can feel stuck and as though they have nowhere to turn. They can be afraid to answer their phone, read their email or get their physical mail for fear of being hounded by yet another debt collector.

The thought of filing for bankruptcy can be hard for some Pennsylvania residents to swallow in part because it can be difficult to know which type of bankruptcy to file for. Understanding how a Chapter 7 bankruptcy works and how a Chapter 13 bankruptcy works can help a person make the right choice for their situation.

Bankruptcy basics

Both types of consumer bankruptcies, Chapter 7 and Chapter 13, allow debtors to retain some assets as both plans identify a threshold for exemptions and items valued below the set level may be kept out of the bankruptcy process.

Another important point to understand is that both bankruptcy plans will evaluate a consumer’s income and expenses. Any money left after basic living expenses are paid may be deemed to be discretionary income.

Consumers should also be aware that some debts are not dischargeable via bankruptcy. Credit Karma explains these include spousal and child support, and some taxes.

Chapter 7 overview

In a Chapter 7 bankruptcy, a person’s nonexempt assets may be seized and used to repay creditors. Debt relief from this type of bankruptcy is achieved relatively quickly once the filing has been made, often within a few months. Any debt included in a Chapter 7 plan is discharged.

Chapter 13 overview

A Chapter 13 bankruptcy does not automatically discharge all included debts. Instead, it is more like a structured repayment plan in which the debtor makes monthly payments to a trustee for 36 to 60 months. Those payments are used to repay at least some of the money owed to creditors.

A person must have sufficient disposable income to qualify for this type of plan. A Chapter 13 bankruptcy may also give a homeowner the ability to avoid losing their home, but it is important for them to know that their mortgage would not be part of their bankruptcy plan. They must be able to catch up on any past due amounts and remain current with mortgage payments going forward while they are also making their Chapter 13 monthly payments.

Legal help is recommended

People who need guidance on how to get the right level of help for their debt relief needs should contact an attorney who is experienced in consumer bankruptcy. This will allow Pennsylvania residents to make educated choices that are in their best interests.

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When You Get Divorced…Actually Get Divorced

Many couples who have financial problems feel like they should still co-own assets after divorce. Maybe you are upside down on the mortgage on your home and you would lose money selling it.  Perhaps you have debt you still want to co-own or can not split for some reason.  Perhaps one of you wants out of the house but there is not enough cash to be bought out.

 

The problem with co-owning anything after your divorce is that you will no longer be married and co-ownership without that legal protection of marriage can be scary.  A good divorce attorney can help you brainstorm ways to ensure that your assets and debts are split in such a way that you each take your fair share and, most importantly, become financially independent of one another.  

 

You can learn a few things from this story:  A couple divorced after 15 years of marriage.  Upon the divorce they continued to co-own the marital home, an investment property, and a HELOC against the marital home.  With this much joint ownership after a divorce, there were bound to be problems.  


  1. They maintained the marital home and nested their children.  Each parent moved in and out according to their parenting agreement. They did this for the emotional security of their children.  However they didn’t have money to maintain the house and it fell into disrepair over the years, to the point that it could not be sold for market value.  


Lesson learned:  While nesting may seem like a great idea, it requires substantial financial resources to maintain the home for the children, particularly when neither of you are really still invested in the home.  Additionally each parent also needs a place to live when they are not with the children so you need the cash to maintain three homes.  


  1. The investment property was the primary responsibility of the ex-husband and after some time he tired of it.  He decided to sell it, forgetting it was in joint ownership.  Additionally he sold it “short sale” forgetting that the down payment was in the Heloc against the marital home.  Once it was sold he had a legal quagmire on his hands in violation of the divorce agreement and now there was no asset and yet a substantial debt to pay.  


Lesson learned:  After your divorce it is best not to jointly own any investment or debt. As former partners, it can be hard to reach an agreement on what should be done and one partner may feel they have more right to control or make decisions.  


3)  The ex-husband unexpectedly died. The HELOC was only in his name and his estate immediately went bankrupt.  Typically, debts are forgiven but since the house was securing the HELOC, the ex-wife had to start making the monthly payments or face a lien.  Furthermore, because the HELOC account was only in the ex-husband’s name, the ex-wife had no access to the account and the bank would not discuss any particulars of the loan with her.


Lesson learned:  If there is joint debt coming out of your divorce it is best to split that debt in some way and move on independently.  If you must co-own anything, ensure that, in your divorce agreement, you mandate life insurance be maintained specifically for the repayment of debt.


Divorce is not easy and many times finances are a factor in your reason to split. There is always a way around a difficult situation and we can help you creatively solve your financial issues so you can independently walk into your post divorce life.

 

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September Newsletter

We love this time of year as the weather is enjoyable and more time can be spent outside.  We have had some glorious weather here in PA, even as the summer has come to a close.  With your very busy lives we want to provide you with some great information on saving money and having fun at this time of year!

 

Saving Money When Getting Divorced

Many couples fear the divorce process because they do not want to pay high legal fees.  Household budgets are already stretched and the thought of paying legal bills makes many feel they can not afford to get divorced.  In our new blog “Are You Too Broke To Get Divorced?” we discuss this issue and offer great tips to cut down on legal fees. /blog/2017/09/are-you-too-broke-to-get-divorced/


Fall for Single Parents

As a single parent you may feel as if there is just never enough time in a day to get everything done.  Being Mom or Dad while juggling schedules and your career can be overwhelming.  Sometimes you just want to spend a few stress-free and unscheduled minutes with your child and need a great idea. Here is a great list – over 100! – of activities to do with your kids: https://www.thespruce.com/absolutely-free-activities-for-kids-2997490

 

Student Loan Debt

Dividing assets and debts is a significant part of the financial negotiations of your divorce. Student loan debt, acquired during the marriage, is subject to distribution. However, rather than divide it equally, the court may choose that the spouse who earned the degree take more of the debt.  How you negotiate all debt in your divorce depends on your individual financial situation.

 


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