Getting a Divorce

In a Divorce, just as a couple must divide what they own, so they must divide what they owe. Generally, only a marital debt is divided during a divorce, which means that debt incurred for the joint benefit of the parties during the marriage. Joint benefit does not necessarily mean joint use.

It is important to know that whatever debt you incur for the marital benefit or on a joint loan account has the provision of equal division. Not all debts incurred during a marriage, however, are marital. Debt incurred through gambling, high living and reckless investment is not a joint responsibility, even when the obligation occurred during the marriage. In court, and however one must prove that a marital debt exists. Sometimes loan taken by a spouse on a credit card having both the names of the partners then they are liable to pay the debt even after a divorce.

Marital debts is divided in many ways, couples negotiating a divorce can pay it all off when the property is divided, or, they continue to service it jointly, or, they divide it and each take a share of responsibility. Sometimes it is difficult to go for the first option, since the marital debt may exceed the value of the total property. However, it is wise to do so since it removes any future complications in the matter. The second course of action is opted more often as this solves the problem of complex paperwork and calculation and legal issues. The last option is opted by those who do not have a dispute over the debts incurred during the marriage. The value of Business owned by spouse is an important aspect while filing for division of marital debts. Debts incurred in the business are also questionable. If an individuals spouse fails to pay off a car loan or a credit card bill for which the individual is co-signs then, the creditor can – and will – initiate collections against the individual. Therefore, it is very important that during a divorce settlement regarding the division of debts is completed properly.

Complications arise when after a divorce one of the spouse files bankruptcy. Loans taken are then screened for personal benefits and marital benefits subsequently. As mentioned earlier, couples are responsible for joint loans. Therefore, even if one files for bankruptcy the other will and has to pay the creditors for the joint loans taken. The division of marital debts must take place under the guidance of expert lawyers to avoid future complications and the process of division is for the optimized outcome for both the individuals involved. Equal division of the liabilities and assets places the responsibility of repaying a marital debt on both the individuals concerned. All home mortgage lenders will require refinancing before removing either spouse’s name from the mortgage. The mortgage lender will look solely at the financial situation and debt-to-income ratios of the re mortgaging spouse in determining eligibility for a new mortgage. Thus, mutual marital debt division is the best way of dividing marital debt.

How often have you heard about a divorce that went well? And when someone tells you their divorce went smoothly with no hard feelings, you would be smart to wonder how the other side felt about the divorce settlement. There are definitely winners and losers in divorce proceedings, and all too often, one party is left with too few assets or too many debts. These days, it’s not just a question of who gets the house. It’s also about who has to pay off the loans – a big factor in today’s credit-mad society.

So what should you do to make a clean break from someone else? You must split your financial life formally and legally. You also need to continually check your own credit report to make sure that your ex-spouse is doing what they are required to do (and no more). If your name is still on a loan or credit card, it can take some expensive legal wrangling to prove that you’re not responsible for old debts or debts incurred after the divorce is final. And the final ruling might not be in your favor.

Pay careful attention to the following details:

Credit Cards – These should be paid in full and closed. If there isn’t cash available to pay off the cards, then a balance transfer should be made to a new card that is issued only to the responsible party’s name. It’s not enough to close the old card to new charges. The truth is that if both of your names are on the card, then either one of you can reopen the account to new charges without the other’s knowledge. The result can be disastrous to your financial health.

Mortgages – Typically, your divorce degree will tell you who is responsible to pay the mortgage. However, if the mortgage is in both your names, it should be refinanced into the responsible party’s name. If your name is still on the mortgage, and you’re no longer responsible for payments, your ex-spouse’s late payments could affect your credit and your ability to finance a new home.

Loans – Your loans should be handled the same way as the mortgage. Even a relatively small loan, like an appliance store credit account, needs to be transferred to the responsible party’s name. Small loans can hurt your credit when they are paid late or defaulted.

Beneficiaries – Beneficiaries are often forgotten in divorce proceedings. I’m not talking about the physical presence of your loved ones and dependents, I’m talking about the name you’ve automatically written on all your accounts since you were first married. Who gets your assets if something happens to you? If you’ve always written your spouse’s name, then you need to update the beneficiary line on your investment accounts, insurance policies, and retirement accounts to make sure that the parties who most need the money will have it available to them.

I have a client who missed one of these details with her divorce. As a result, she was threatened with wage garnishment and had to make the difficult decision to file for bankruptcy. She now has a higher interest rate on her mortgage, credit cards, and homeowners’ insurance. Higher rates mean that it’s much harder for her to afford some of the necessities.

A personal friend of mine filed for bankruptcy with his divorce and thought that all of his credit debt was in the bankruptcy. When he went to purchase a new car, he found out that one credit account was not included in the bankruptcy and therefore he had trouble getting his auto loan. He did finally get the loan, but at a much higher interest rate.

Don’t let this happen to you. Making a clean financial break will make it much easier for you to start over. If you’re not sure which debts are in your name, ordering a credit report can give you the knowledge you need to begin sorting through the details.

All marital assets are not equal! Even if the goal is to try to “split down the middle”, asset valuation prior to making a final division is critical. If for example the family home and a pension/retirement plan are both worth $400,000 today, the home is a non-liquid asset requiring cash-flow to support it, while a retirement account grows tax deferred with no cash input required. Retirement assets can be reallocated with changing economic factors, and thus can more easily rebound from market fluctuations.

Before waiving rights to a retirement plan that is a marital asset, be certain you will be able meet your own retirement needs. When assets are tied up in the equity in the family home, the only way to access that equity is with an equity line (interest is charged to access your money/equity) or by selling your home. The tax liability should be understood beforehand, and you will still need housing!

Taxable accounts differ from a tax-sheltered account for the same reasons, as earnings will be taxable each year. The age of the couple at the time of the division (ie, the number of years to rebuild retirement assets) must be weighed. An experienced financial planner and a CPA can determine the true value of marital assets, and suggest the best possible long term strategy for you. Thinking beyond today’s value is extremely important in reaching a fair settlement.

Earnings Potential: One spouse often earns a lesser percentage of the household income, or has minimized a career in order to raise children. They may need help to pay for additional career training or education, as well as to meet the children’s needs during the time that additional training or education is being obtained. A house cleaning service or childcare may be needed for this to be realistic and successful. Short term assistance may result in greater long-term financial independence. Providing the financial means for the spouse who now needs to boost their earnings, or return to the workforce, for career counseling, or personal and career coaching, may help move the family along the path of healthy divorce recovery. Think of it as similar to career outplacement services in the corporate world. Facilitating a smooth and successful transition ultimately financially stabilizes and benefits both the children as well as both former spouses.

QDRO: A spouse who receives part of his or her spouse’s qualified retirement accounts will need a court order called a “Qualified Domestic Relations Order.”(QDRO). Your attorney needs to be aware of ALL retirement accounts and the QDRO rules are for each plan. To expedite the QDRO, your attorney should obtain pre-approval from each plan before the settlement is final. The court must sign the order before an account can be divided. Be sure the order is sent to the retirement plan sponsor and is approved early in the divorce process. If not completed before the divorce is final, you will have to return to court later, incurring more legal expenses and risking the loss of assets in the account. Include survivor benefits in the QDRO. If you will be receiving retirement benefits from your former spouse’s pension, be sure the QDRO includes survivor’s benefits, if the plan allows them. Otherwise, those benefits could stop if your spouse dies before you do.

Also, understand your Social Security benefits. If your spouse earns more money than you do and you were married ten years or more, you will be eligible for Social Security benefits based on your spouse’s work history. That may mean higher benefits than if you have to rely on your own work history, and does not impact the benefits of the ex-spouse at their retirement time.

Tax Implications: Access to expert tax advice plays a critical role in determining the structure of a property settlement. Say it’s proposed that one spouse keeps a $150,000 individual retirement account and the other keeps a $150,000 taxable investment account. Sounds fair, but it’s not. A traditional IRA grows tax-free, and is then taxed when their money is withdrawn, while the non-retirement account is taxed on annual earnings along the way. So the two accounts are not truly equal in value, and sound assumptions of the projected net values are needed. Also, be sure the parties taking tax benefits are clearly spelled out, as well as how taxes will be filed and paid, for any partial year of marriage.

Life Insurance: If you rely on an ex-spouse for child support, retirement benefits, spousal support, or other financial benefits such as a commitment to pay for the children’s college education, purchase a life insurance policy on your spouse to ensure the money will be there. You should own the policy, and purchase it before the settlement is final so you know whether your spouse is insurable.

Sometimes people fail to consider the financial impact of the death of a non-working or part-time employed parent who is caring for children. The cost to replace all the contributions of that individual in order that the surviving parent may continue with job security and income production needs to be calculated and also covered in a life insurance plan. Some estimates are as high as $160,000 a year to outsource the services that custodial parents provide. The option to continue existing coverage and transferring those responsibilities along with updated beneficiary forms should be explored. This includes any current coverage of minor children.

Protecting Your Credit: Both spouses are liable for debt incurred on jointly held loans and credit cards during a marriage. Even when the divorce decree states that one spouse should pay certain bills and the second spouse pay others, both spouses are legally responsible, and creditors will pursue both parties in debt collection. It is important to request duplicate statements from creditors, close jointly held accounts, and immediately begin establishing credit in your own name. Working collaboratively on establishing separate credit is advised as during the time you are doing so, both parties’ credit scores are impacted by all of the joint credit and debt from the marriage. This can delay approvals and impact credit limits approved, as well as the ability of the individuals to refinance mortgages and car loans. Order and review reports from the primary credit monitoring agencies. This is recommended prior to finalizing the asset allocation agreement because there may be errors that need to be identified and addressed by the divorcing couple jointly. Re-check credit reports before signing final documents to be sure there are no “hidden”, new, or forgotten debts that may surface after the divorce is final.

With the emotional strain and financial complexities of divorce, a comprehensive, integrated, and coordinated approach is the best way to assure a fair and equitable distribution of assets. Everyone benefits when both parties have the support, guidance and means to move forward with their lives, and children are the biggest winners when parents work together for their benefit.

It is no secret that going through a divorce can be an emotionally trying experience. Everyday, your patience and understanding is pushed to the breaking point. But when the ink is dry, and you’re finally on your own and ready to heal, the most important step you should take is managing your finances.

Understanding your finances is a vital part of gaining, or regaining your financial freedom. While everyone’s finances are different, the following list is a good place to begin if you find yourself needing to regain financial control.

Revise Your Will/Trust: Whether you have had a will or trust in place in the past, now is the time to meet with an estate-planning attorney to draft one. This document allows you to determine who will inherit your hard earned assets, who will care for your children in the event of your death, and how your children will inherit the assets you have left to them. It is important to establish these guidelines rather than leaving the decision up to the state. In addition, you should ask your attorney about a medical directive. This important document appoints a trusted love one with the ability to make medical decisions on your behalf if you are unable to do so.

Update your beneficiary designations- While you have taken the steps to update your Living Will or Trust, certain accounts require you to directly appoint a beneficiary. This includes your life insurance and retirement accounts. Contact your life insurance company or broker, as well as the companies where your retirement accounts are held and request a change of beneficiary form. This form can usually be faxed in, no questions asked.

Develop a Budget: It is important to put together and follow a budget. Now that you are living off one income, instead of two, understanding what income is coming in, as well as what income is flowing out, will allow you to plan for expenses and ensure you are not overspending. You may need to cut back or you may have more money to save! Either way, it is important to know for sure. During this process, it is also important to understand how you income is being taxed. For instance, child support is not taxable. Speak to a tax professional to help you determine what is and what is not taxable.

Manage your Credit Cards: Have you pulled your credit lately? It is important to review your credit report to ensure that your ex-spouse is no longer authorized on your cards. This is an important step for home and car loans as well.

Develop a Retirement Plan: During divorce settlements, retirement assets are often split 50/50.This may or may not have worked in your favor. Either way, it is important to understand what you can expect, and what you need to plan for. A Certified Financial Planner can assist you in forecasting your retirement need, developing a savings plan, and determining which investments are right for you.

Reassess Your Health Insurance Needs: It is important to be sure that your health insurance is sufficient to cover your needs, but isn’t too expensive. If it is through your work, don’t forget to remove your ex from the plan. If you were previously on your spouses plan, you do not need to wait until open enrollment to sign up at your company. Just make sure you act quickly. Most insurance companies consider divorce a “qualifying event” or “life event” and allow thirty days to change your plan accordingly.

Life Insurance: In order to be sure your children are well provided for and your debts will not affect those you love, having adequate life insurance coverage is important. I recommend using a life insurance calculator or speaking with a Certified Financial Planner to determine how much coverage you should purchase.

While everyone’s situation is different, applying these steps will allow you to begin on the path to financial freedom.  Understanding your current financial picture while setting goals for your future are important steps in starting your new life.  Please give us a call to schedule a time to review your situation.

After a divorce, you’re left with a tangle of emotions to sort out. On top of that, most individuals are also left with a tangle of debt to pay off as well. While it can seem as if you will never get things straightened out, you will! This article discusses important tips and one of the most effective ways of paying off credit card debts after a divorce.

First, Gather Each of Your Credit Card Statements

The first thing you need to do is gather the most current credit card statements you have. Grab a notebook so that you can make notes. Find out which one of your cards has the highest balance. You also want to know which one has the highest APR or Annual Percentage Rate. When you find the one with the highest APR and payment, list it on your paper first. Continue down the line, with the last credit card being the one with the lowest APR and balance. Beside each credit card, list the balance due and the minimum payment amount.

Now, Start Getting Rid of Your Debt

Now that you have established the highest interest rate cards, your job is to pay them off starting with the highest interest rate. Pay more than the minimum payment on the first card – in fact, pay all you can afford to pay without neglecting the other minimum payments. This will help you get the highest interest card paid off first. Once you have that card paid off, you can remove it from the list, cut the card into pieces (optional) and then move onto the next card on your list. By using this method, you will effectively cut through your credit card debt.

What About Once the Cards are Paid Off?

Credit cards are dangerous. It’s just too easy to pay for something that you don’t have the money for, use them when you really, really want something expensive and other situations that can get you into trouble. While most people should probably have one credit card in order to pay for emergency situations or to build credit, there is no need for more than one. If you can’t pay for the item you’re purchasing, don’t purchase it. Getting rid of your credit cards will keep you from accumulating another pile of debt that you just don’t need. It’s up to you whether you want to keep them or get rid of them, but cutting up your credit cards brings a freedom that feels great!

Credit card debt is nasty, nasty business and if you use the tips above, you can effectively get rid of your debt in a way that will save you more money. You can also pay off your credit card debt more quickly and get back to a life of freedom. You will definitely feel more stress free once you’ve paid off your debts and the collectors stop calling and writing letters. Use the tips above to achieve that freedom!

If one of the primary reasons for a split emanated from excess debt and credit challenges then there may not be a lot of cash floating around to effect a quick settlement. Additional complications may flow from a foreclosure and/or bankruptcies where one party may not want to stay around for the rebuilding phase. It could drag on for a while, as there is not enough money to pay the lawyers. Time kills credit ratings in an emotionally charged atmosphere where an otherwise ‘normal’ person takes on a new persona. The game evolves into a pushing game of resistance and tugging with plenty of blame flying around. If the shoe is dropping, each party needs to take action to protect their respective futures. We will assume that all attempts at reconciliation and marital counseling have been exhausted.

Whether the split is amiable or not it will be necessary to take a quick inventory of the financial assets. This will include any real estate held, automobiles, personal property, toys, credit cards, installment debt, mortgages, utility bills, cell phones, water, sewer, trash, electric, 401(k)’s, IRAs, stocks, mutual funds, bonds, insurance coverage and a multitude of other things intertwined into what was a marriage. Collateralized debts such as houses and cars will need the payments to be maintained or the lender will pick them up or repossess them. Utilities will need to be maintained or they will be shut off. Cash accounts being cleaned out by one or both of the spouses will tax and stress an already tense situation. A budget for two residences, assuming there is a separation, will be necessary putting further stress and strain on the crumbling relationship and financial resources.

This process may proceed and play out like the movie with Danny DeVito and Bette Midler in “Ruthless People” or the movie “War Of The Roses” with Michael Douglas and Kathleen Turner or even the movie “The First Wives Club” where revenge and getting even or ahead is the common thread. Everyone has been touched by divorce somewhere in their family or a circle of friends or acquaintances. It’s not close to being funny when one is living the nightmare. Some of these real life situations have ended tragically. This is not a movie. It’s the real deal, no popcorn served here. When cooler heads prevail, there are some elemental steps that will help each spouse and their financial futures.

With an inventory completed of the financial and asset side of the marital property the credit cards need to be acted on immediately. Any jointly held cards should be frozen immediately with no further charges allowed by either party. Individual cards can be maintained, but may now be flagged to require an exact signature to be accepted. Debit cards will need to be cancelled on joint accounts. If children are involved it makes for a higher degree of emotional tug of war. Each party needs to pull the free annual credit report from the three credit reporting agencies which includes, Experian, Trans Union and Equifax to take a snap shot of their credit report and status of all accounts as of that date. If the parties are talking, efforts can be made to divide up the assets and handle the marital home and support issues, if any, with a calm and rational approach. If attorneys are engaged at the outset it’s important not to abdicate full responsibility for one’s credit health by keeping an early eye on the ball. If there is a property settlement where the husband or wife is directed to make payments of this or that it will still effect both parties IF it is jointly held credit. Non-payment will injure the other party if the court ordered divorce decree and/or maintenance is not followed. Depending on how the settlement unfolds, as soon as possible the mortgage needs to be put in one or the others name along with the deed changes. This is accomplished by paying off the old mortgage with a new one. If the existing mortgage is late it will adversely pull down both credit scores. With mortgage lates, neither party will be able map out a credit recovery plan. Cars with joint liens need to be sold or traded to get the other spouse off the title and lien.

It’s important to note that personal or real property liens trump any divorce settlement. If payments are not made the credit is adversely effected. For some splitting couples, selling the house, filing bankruptcy, moving to other job locations is their only resolution. Two income households now become one. Changes have to be made. Once the assets and liabilities are sorted out with a plan of division and support are in place then a proper course of action can be set. A good Family Law Practitioner is an important piece of the resolution of the split. Everyone has heard of many a gut wrenching, traumatized, stress max divorce. Going through this wringer is an emotional grinder. If the spitting parties can focus on doing a fair split while preserving their financial positions then each of their credit histories can be shored up to begin the rest of their respective lives. Whether it is refinancing the homestead mortgage to buy out one of the spouses equity, or dividing the cash up and other assets and split the credit cards debts the parties give themselves an opportunity to move on to a new life. Otherwise financial ruin for 7 to 10 years may be guaranteed through a mortgage foreclosure or bankruptcy becomes the end game. Counseling can help set the stage for reconciliation or that dreaded phrase “Irreconcilable Deference’s” can lead to an amiable splitting and allocation of the marital assets. There are so many nuances to this division and moving on. There are infinite combinations of factors that come into play. Again a good Family Law Practitioner can be helpful, BUT each party must be focused on their own financial credit health and must be proactive in the protection of their credit histories and how that may play out in the divorce settlement. Each needs to determine all the facts and bring in whatever assistance necessary to help in that endeavor. Every effected party has an opportunity to set the tone of how things proceed, assuming all other things being equal. It’s either that or the battle royal with pounds of flesh extracted from each donor. Divorce can be a “Death Like” experience. For many divorce participants it defines them the rest of their lives, for others it’s just the beginning of the rest of their lives. Maintaining one’s credit history can pave the way to the future. It takes proactive planning to make it happen. Ignore it at their peril.

Dale Rogers

http://www.brokencredit.com

http://www.sellerhelpsbuyer.com

News Flash! Life insurance is a traditional asset that can now be purchased or sold like any other personal property, much like a house, car, antiques, old painting or stocks and bonds. Therefore, insurance policies can be sold like any of your other personal property item. However, most people do not know they can sell their policies.

Sometimes called senior life settlement, life insurance settlement or senior settlement – its all the same – the sale of an existing life insurance policy by a senior (a person 65+ years old) on the secondary market to an investor for a percentage of the insurance amount.

A huge insurance industry secret: Over 90% of life insurance policies never make a payout. This is because most people let their policies expire (lapse) or turn them back in to the life insurance company for a small cash value.

Few senior policy owners realize that their policy might bring 5% to 25% of the death benefit through life insurance settlements or senior life settlements. On average, life settlements are at least three times larger than policy cash surrender values. In almost all cases, a senior life settlement will be less than the policy’s death benefit, but much more than its cash surrender value.

Most policies are lapsed because of high cost or other financial strains. Sometimes a policy holder may no longer need to have a particular life insurance policy. So, there is little point in keeping it and continuing to pay the premiums. Senior life settlements allow policy holders to receive a large lump sum of cash in exchange for transferring the rights of ownership of the policy to an investor.

Senior life settlement example: The senior was a 73-year-old male with a $1,500,000 Variable Universal Life policy $2,600.15 cash surrender value. The senior no longer needed the policy. He could have surrendered it, but decided to get a life settlement appraisal. The value was assessed at $345,000.00. Had he surrendered the policy, he would have lost $ 342,399.85. This is the value of senior life settlement.

Senior life settlement works like this: a financing firm will pay the policy holder an agreed-upon amount for the life insurance policy. The policy holder transfers all rights and obligations to the investor company, which then pays the insurance premiums from that point forward. When the old policy holder dies, the investor company will act as beneficiary and collect the policy’s face value amount.

The number of individuals in the United States over age sixty five (65) will grow to a projected 69 million by 2030 (Source: US Bureau of Census). As a result, some have predicted the senior life settlement market to “grow…to $160 billion over the next several years.” (Source: Bernstein Investment Research of New York City, 2006). Of the $1.4 trillion in overall cash value life insurance in 2002, it is estimated that senior citizens held policies worth $492 billion.

Major reasons why seniors seek life settlements: they no longer need or want the coverage; the policy is too expensive; policy is about to lapse; beneficiary is now deceased; desire to distribute the funds while living; make other investments; start a new business; divorce settlement; donate to charity; need extra retirement funds; assist family members, etc.

Senior life settlement funds can be used for any purpose including everything from paying medical bills to going on a dream vacation. These transactions provide seniors opportunities to immediately benefit from the market value of an existing life insurance policy and reuse those funds for whatever purpose one chooses.

Senior life settlement qualifications: 65 years old minimum age; $250,000 minimum policy face value; policy in force for at least two years contestability period); and premium percentage 55 or less.

Policy type must be whole life, convertible term, universal life, variable life, joint policies, key man policies and even some group life policies (with no existing liens).

How much a senior will receive depends upon: the insured’s health condition (life expectancy); annual cost of maintaining premium payments; policy face amount; and the funding company’s discount rate.

Senior settlements are sometimes mistaken for viatical settlements. Though loosely similar in some respects, they are decidedly different in others. Viatical is a settlement designed for any aged individual with a terminal or chronic illness. Senior life settlements, on the other hand, are designed only for individuals 65 years and older; life expectancy may extend for as many as 15-19 years.

You now have the knowledge to help those seniors around you. Spread the word. Inform all seniors, elder caretakers, endowments, non-profit organizations, estate attorneys, insurance agents, financial planners, trustees and everyone you know about the power and possibility of senior life settlements.

By Lauren Sigman, Certified Financial Planner™ Located in Denver, Colorado

Divorce creates a huge emotional upheaval for both parties. Addressing financial concerns of a divorce in a calm and objective manner will benefit everyone in the long-term.

Here are five of the most frequent divorce financial mistakes and how to avoid them.

1. Taking the house. The spouse who will have custody of the children typically wants to keep the family home. While this may be desirable emotionally, it can be financially problematic.

A home is an illiquid asset that costs money to pay for and maintain. Consequently, it may be better financially to sell the home and split the proceeds.

2. Assuming equal is equitable. Frequently, the wife takes the house and the husband keeps his pension or retirement accounts. Say both are valued at $400,000. The home is a cost-burden, while the retirement account is a liquid asset that can continue to grow, tax deferred, and probably at a faster growth rate than the home.

3. Not examining earnings potential. Often, one spouse has minimized a career in order to raise children. The settlement needs to take this into account, perhaps by providing extra money to the homemaking spouse to pay for additional career training or education.

4. Not thinking about taxes. Say it’s proposed that one spouse keeps a $150,000 IRA and the other keeps a $150,000 taxable investment account. Sounds fair. But it’s not. The owner of the IRA will have to pay taxes on that money when it’s withdrawn, so the two accounts are not truly equal in value.

5. Only using a lawyer and an accountant. Hire a Certified Financial Planner™ professional trained in divorce financial issues to work alongside your attorney and CPA. A Certified Financial Planner™ can objectively examine long-range issues such as budgeting, appreciation, and tax ramifications of the proposed settlement assets; as well as the long-term costs associated with settlement proposals. A financial planner, working alongside your attorney and CPA, can help ensure the divorce settlement is financially fair to you.

A divorce can leave things a real mess. Not only do you have to deal with the emotional strain, financial strain and the anger and other emotions you’re left with – but you also have to find a way to untangle the mess that is left behind. For instance, your bad credit! While it’s easy to ignore the fact that there’s a problem, bad credit can make it really hard to move on and start over. This article discusses how to clean up your bad credit after your divorce.

Obtain a Copy of Your Credit Report -

The first thing you need to know is what your credit looks like. Which bills are going against your credit? Are they even supposed to be there? You can find this information by getting a copy of your credit report. You’re entitled to one free credit report per year. You can write and request a copy of your report from the three major credit bureaus, Experian, Equifax and TransUnion. You can also visit online credit monitoring sites such as www.freecreditreport.com. When you get the copy of your credit report, you’re able to go over the things against you to determine what you owe and what doesn’t need to be there.

Dispute Any Reports That Don’t Belong to You -

If there are any bills on your credit report that you’ve already paid or that don’t belong to you – you need to dispute them. You can write to each credit bureau and tell them why the bills are not yours, or supply them with receipts where you have paid those bills off. There are many incidents of reports against people who they don’t actually belong to, so pay close attention to your report. Even when you pay off an old debt that was against your credit, you have to write all three credit bureaus and let them know that the bill has been paid and give them the receipts to prove it.

Start Paying off Each Bill That is Against Your Credit -

While most people would think that you should start with the oldest bills, you should actually start with the newest bills. The reason is that the records on your credit report drop off after 7 to 10 years. If you have several bills that are close to dropping off your report, you can handle those with the companies rather than worrying about them right away. Instead, focus on the newer bills and the ones with the highest interest. Cut down on your unnecessary spending at home and save all your extra money to pay off those bills. This will help you get them paid more quickly so that your credit rating goes up. You can also use one credit card to pay for things you already have the money for. Pay it off in its entirety each month and you will build your credit back up.

By using these methods, you can effectively clean up your credit report after a divorce and get back to normal. This will help you in the future when you go to purchase a home or a car. Without a good credit rating, you may not be able to get financed. Follow the tips to help you on your way to a good credit rating and a new life.