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Protecting your financial future after divorce

Many Alabama residents know divorce is a very challenging matter on its own. Matters of property division can become further complicated, however, when a couple is going through financial struggles and on the brink of bankruptcy.

There are certain steps an individual may take in order to simplify the process. For example, in conjunction with working with a qualified attorney, a person may take steps to organize his or her budget and get a complete picture of his or her assets and liabilities.

Individuals may want to close any joint credit card accounts they maintain with their spouse in order to cease accruing more charges. After doing so, it works well to make sure the remaining balances on these accounts are divided equitably among the spouses and then transferred to individual accounts held in the name of each partner. This step will ensure that one spouse is not on the hook for another’s failure to pay joint debt.

Aside from getting off the hook for the other spouse’s debt, this is also essential to protect a person’s credit from being damaged by an ex-spouse. Creditors cannot close a joint account by themselves, but they may with one spouse’s permission.

However, once a joint account is closed, creditors may then require each person to apply for individual credit. Because a person’s credit worthiness is defined by his or her income, assets and credit history, the move from a joint account to an individual account may have ramifications if one spouse’s credit is not up to par.

For instance, if one spouse did not work outside the home, it may be difficult for that person to show his or her strong credit history to creditors. Ultimately, an attorney experienced in complex property division may be able to assist individuals as they consider these issues in the context of their pending divorce.

Source: Fox Business, “Divorced and Unemployed: Time for Bankruptcy?,” Steve Bucci, Oct. 18, 2012