Managing debt effectively requires careful planning and responsible spending. Throw a divorce in the mix and you might wonder how to prevent disruptions in your payment plans.
Knowing some strategies for handling your debts during an unprecedented time can help you avoid some common pitfalls. Your vigilance can help you optimize your resources and maintain the money you do have despite the changes in your personal life.
Sure, no one wants to walk away with the sole responsibility of paying a shared debt. However, divorce is one circumstance where you might need to do just that. The courts will assess several factors in determining how to split the debts you and your soon-to-be-ex still owe. Some things they might look at include the following:
- The name(s) on various loans
- Who incurred specific debts
- The purpose of the loan
One of the smartest things you can do at the start of your divorce is to try and negotiate debt responsibilities with your spouse. Amicably decide who will take responsibility for specific debts throughout the duration of the divorce. If communication of this type is not an option, you might need to rely on mediation or some other form of legal intervention to help make these decisions.
Shared debts can harm your credit score, particularly if your name remains on unpaid loans that fall under the responsibility of your soon-to-be-ex. According to CNN, a powerful debt management strategy is to develop reasonable repayment plans with your lenders. If your divorce requires you to restructure certain debts or take full responsibility for others, immediately contact the respective lenders and negotiate an agreement that works with your budget.
Open your own bank account and move any loans that you need to repay into your name only. This will remove the risks of bad financial decisions on the part of your ex, from disrupting your credit. Taking a thorough inventory of shared debts, identifying your responsibilities and establishing credit can help you minimize the financial risks of managing debt during your divorce.