It’s no secret that a divorce is a difficult and painful process. It represents an end to a way of living you may have grown familiar with and attached to, taking a heavy toll on your mental and emotional well-being. But what many divorcing couples underestimate is just how damaging a divorce can be to their finances.
Aside from the cost of attorney’s fees, you also have to anticipate the impact of a divorce on your credit. Here’s a quick look at just how this happens.
You May Have to Refinance Your Home
If you want to negotiate to have the house under your name, you need have to refinance your mortgage, which in turn, will lead to a credit inquiry and taking on more debt.
You will also need to buy your ex’s share on the equity of the property. While the buyout amount is negotiable, expect to pay taxes and other fees if you want to sell the property in the future.
You Have to Split Assets and Debt
When dividing assets, you or ex may negotiate to get more alimony, property or assets. But this can come with the hidden cost of taking on more debt, hence the importance of working with a divorce attorney to determine how existing debt on conjugal assets can be divided.
You’ll Have Just One Source of Income
Many divorcing spouses get caught off guard after realizing that what was once two sources of income end up becoming just one. And so, they find themselves faced with the reality of having to adjust their lifestyles relative to their income. In fact, many divorced people confess that losing another person’s income made the greatest impact on their finances.
The best solution to this problem is to create a budget and make the necessary lifestyle changes ahead of time. Consolidate your debt and trim recurring bills—do what you can to live within your means.
You May Have Debt You Never Knew About
During the divorce proceedings, both you and your soon-to-be ex are required to disclose all your financial accounts. But as many people have learned, not everyone is honest about their assets and liabilities.
In fact, your spouse’s outstanding debt might even be under your name. The best recourse is to get a credit report, which will provide a comprehensive overview of any account with your name on it.
Liability for Mortgage Payments After the Divorce
Even if your ex buys you out of the family, you may still be liable for making mortgage payments. If your ex misses a payment, your credit score also takes a hit because the mortgage still has your name on it. Lenders only care whose names are on a joint mortgage, so unless you sell the house, refinance to remove your name, or pay off the mortgage in full, you are still liable for missed payments.
If you, or a loved one, are going through a divorce and need an appraisal of your finances and resources, schedule a consultation with family law attorney Daniella Lyttle to discuss your legal options. Call the Lyttle Law Firm today to find out how we can help you at (512) 215-5225.