How Can I Prevent My Ex from Damaging My Credit and Finances in a Divorce?
Perhaps hell hath no fury like a woman scorned, but when it comes to divorce, both former partners can be pretty vindictive. And if their feelings drive them to take advantage of your finances after a separation or divorce, it can cause some serious issues for your financial standing and credit rating.
You can take a number of steps to protect your finances and credit from an upset ex, from removing their name from your credit cards to putting a fraud alert on your credit report to stop them from making improper claims using your accounts.
The first step in protecting your finances is to separate yourself from your ex on credit or debit cards. If you are an authorized user on your ex’s card, remove your name, and remove them as an authorized user on your card. That way, they will no longer have access to some accounts they may have previously had access to, and you won’t wind up having any of their irresponsible spending on your credit record.
In addition, make sure you dissolve all joint accounts. This can be tough because both people have to be present in order to do this, but make sure you continue to make at least the minimum payments each month while proceedings are ongoing in order to avoid negative consequences for your credit rating.
The same goes for cosigned lending agreements. Again, removing your name from a cosigned loan can be difficult if your ex is uncooperative, so it may pay to consult an attorney to decide the best path for separating yourself from any such agreements. This is especially true for significant loans like home or auto loans.
As you separate your finances, it’s important to pay attention to the details of your accounts, as well. Be sure to update your financial institutions with new addresses so that you—and not your ex—receive all of the necessary materials, like new cards and checks. Also, you might want to request new numbers for your accounts, just in case your ex has remembered (or has records of) your account numbers.
In extreme situations, you can also take action by putting a fraud alert on your credit report, which causes businesses to take extra security steps when dealing with credit transactions. If your ex has made improper purchases using your information, you can also submit claims of fraud to the creditor.
How Can You Keep Your Home After a Divorce?
During a divorce, one of the most significant decisions individuals face is whether or not to keep their home. Wanting to stay in the same home can stem from a desire to stay attached to the community, especially when kids are involved, or it can come from the concern that the individual would not be able to afford another house of equal quality.
The decision to keep a home, however, can be a difficult one because of financial complications. Individuals that are separating clearly face different financial conditions than do married couples, and the implications can be significant when it comes to making the decision to keep or sell their home.
In order to keep your home, the first step is to determine the market value of the house. You can typically get a free estimate from a realtor, or you can pay from a more accurate valuation from a real estate appraiser. Once you have determined the value, factor in the amount of debt still owed on the house in order to figure out the present equity.
If couples disagree on equity shares, the dispute usually goes to court, where a judge decides on equitable distribution, which determines how much you will need to pay your spouse in order to buy out his or her share of equity. If, on the other hand, both individuals can agree on a fair distribution, you can skip the step of going to court and move directly to paying for the full equity.
In some cases, you will need to take out more debt in order to pay for your former partner’s share. This is part of the refinancing process that must take place when you restructure your mortgage under your name. Of course, in order to do so, you first need to qualify for refinancing, so it’s important to consult your financial adviser in order to determine whether you are eligible. Also, make sure that you do not begin the mortgage application process until your finances are in proper order, as applying for multiple mortgages can have a detrimental effect on your credit rating.
When considering whether you can afford the home on your own, be sure to factor in all aspects of your financial standing, including your expected income, any existing debt and assets, and the tax implications of having a mortgage (with deductions that could make taking on the mortgage more reasonable).
Think reasonably about whether you can afford your home, and if not, it may be best to sell and look for a more affordable space.
How Do You Determine the Value of Your Home for the Purpose of Divorce?
When going through a divorce, figuring out the value of your home can be one of the most important steps a couple can take.
This is true for equitable distribution of assets no matter what you intend to do with the house. One person may be keeping the house, in which case that person can pay for his or her spouse’s share of equity or allow them to take other assets to reach an equal distribution. Or, you may be selling the house, in which case it is important to know exactly how much each spouse can expect to earn from the sale.
There are a few different methods for determining the value of a home. The first method is for the couple to agree on the value arbitrarily. This method is, of course, only applicable if the couple agrees on the distribution of assets. If one party is keeping the home and the other agrees to take some share of the rest of the property (or a monetary payout), an arbitrary valuation can work. Sometimes couples decide based solely on purchase price, or they may include sentimental value when deciding on an appropriate price.
More standard valuation methods involve consulting specialists in home valuation. A cheaper option is to talk to a licensed realtor. These values are often determined based on market influences and may not be the most accurate valuation of the home.
For an official valuation, you should hire a certified appraiser, who will utilize a number of factors in order to determine a fair value for the house. Appraisal specialists are the most trusted to provide accurate valuations of properties, as is evidenced by the fact that banks and other lenders consult certified appraisers in determining lending agreements with homebuyers and sellers.
Another way to determine the value of your home is to consult your property tax records. In general, however, these records produce numbers that agree with neither realtor figures nor official appraisals.
For an informal method of calculating the value of your home during a divorce, make note of your home’s features and look for sale listings for similar properties. You should consider as many factors in this as possible, including the number of rooms, the size of the home, the size of the property, and any benefits that may come from living in your area. Finally, consider differences between your home and the ones listed, and modify the number accordingly.