En español | Divorce can be unpleasant, particularly if your breakup occurs past the age of 50. There's the emotional sting of dealing with a failed relationship late in life, the challenges of dating again and starting over as a single person, and of course, financial issues to tackle.
Unfortunately, money matters can sometimes take a backseat to the personal drama that unfolds during a divorce. If you're separating from your spouse — or plan to — you need to protect your finances as best you can, especially your credit standing.
Here are 10 ways to safeguard your credit and finances in a divorce.
1. Close joint accounts immediately
Since joint accounts are held by you and your spouse together, both of you are equally responsible for the debt, no matter how it is distributed in the divorce. "If an account is left open, your ex can add more debt, make a late payment, miss a payment or default, and you will also be held responsible," says Bill Hardekopf, a credit expert and CEO of LowCards.com. "The creditor reports account activity to the credit bureau in both of your names. This affects the personal credit score for both individuals."
2. Notify creditors about your divorce
After you close any joint accounts, send a certified letter notifying your credit card companies, banks and other lenders about your divorce.
"Ask them to provide a current account statement and tell them that you do not intend to be held liable for any debt accumulated after the date of the written letter," Hardekopf says. "Request that they put the account on inactive status so no new additional charges may be added, and stipulate that once the balance is paid in full, the account is to be closed completely."
If your spouse is an authorized user on any of your individual accounts, or you're an authorized user on spouse's accounts, each of you should remove the other from the accounts. This will reduce the risk of either party racking up new, unauthorized debts. Again, revoke the authorization on the account via certified mail.
3. Get monthly statements
For any accounts with outstanding balances, insist on getting copies of the monthly statements sent to you. Do the same thing for any accounts you are unable to close or want to keep open for whatever reason. This way, you'll be able to keep track of the accounts and know that timely payments are being made.
4. Don't fight tooth and nail for the house
"A lot of times in divorce, especially for women, they want to stay in the marital home because that's where they've raised the kids and they have emotional attachment to the home," says Alan Frisher, head of Sage Divorce Planning LLC and codirector of Florida Alimony Reform, a nonprofit that raises awareness about money-related divorce issues.
In times past, clinging to a home post-divorce may have made sense, especially in areas where properties were appreciating and homeowners were building equity. But it's a far different real estate market now. Older Americans, in particular, are often cash-strapped and dealing with big housing debts.
"Now, you have to be sure you can really afford the home because it's often more of a liability than an asset," Frisher says. "It's not about who will keep the home, but about who will move on from the home. And that's simply because of the debt surrounding the house."
5. Keep your address up to date
If you move out, your creditors aren't the only ones you should notify about your divorce. You should submit a change of address card at the post office or update it online at usps.com. This way, any bills, credit card statements or other financial correspondences addressed in your name alone will be forwarded to your new residence. The last thing you want is to miss a payment on a credit account because you forgot about the bill or your ex didn't let you know the mail was just sitting there in your former home.
6. Avoid spending binges and revenge shopping
Unfortunately, some people going through divorce try to get back at a soon-to-be ex-spouse or a former mate by going on big shopping binges. If you're tempted to do this, calm down and rethink this strategy because it's almost always a bad move.
"One of the first things I tell both parties is to maintain your normal, current spending habits and not to let debt spin out of control," says Frisher, who is also a Certified Divorce Financial Analyst.
If someone spends recklessly while going through a divorce, even though it oftentimes would be considered a marital debt, a judge may look at the spending and order the spouse who wasted the money to assume that debt, Frisher adds.
Big credit card bills and other debts could prove difficult to pay off down the road and put your credit in jeopardy in the months and years ahead.
7. Use credit cards wisely before, during and after divorce
You still have to manage your regular credit card bills to the best of your ability when you are going through a divorce. Make sure you pay everything on time. If you can't pay in full, at least make the minimum payments. Although you may have big legal bills or other additional expenses related to your separation and divorce, try not to max out your credit cards.
Thirty percent of your FICO credit score is based on the amount of credit card debt you carry. The lower your credit card debt, the higher your credit score will be.
8. Check your credit reports regularly
"After the divorce is finalized, monitor your credit report to see if any errors or problems pop up from the joint credit you had during your marriage," Hardekopf says. You can get a free copy of your credit report — from Equifax, Experian and TransUnion — once a year from AnnualCreditReport.com.
If you're worried about identity fraud or the possibility of your ex opening new joint accounts after the divorce, you might want to sign up for a credit monitoring service. It could happen, considering your ex likely knows your Social Security number and personal data. While most credit monitoring services cost between $10 and $20 a month, a few free options do exist. For example, in December 2012, Credit Sesame began providing consumers with free credit monitoring on its Experian credit reports.
9. Put a "freeze" on your credit files
If a spouse has already shown a vengeful streak or has intentionally abused your credit accounts, you might want to put a credit freeze or a fraud alert on your accounts. Such actions will "freeze" your credit files and prevent an ex from using your Social Security number or opening new accounts in your name.
10. Use a civil court action against an ex as a last resort
Lastly, if a spouse didn't pay certain debts he or she was ordered to pay in a divorce proceeding, you may want to go ahead and pay those debts in order to maintain your credit rating.
It's not fair, but it may be the only way to preserve your good credit. Fortunately, all is not lost economically if you take this approach.
Frisher says that you can go back to civil court and try to get a judgment against your ex for not following the court order.
Hopefully, it won't get to that. After a divorce, many people just want to move on and heal — personally and financially.
Divorce is more than ending a marriage. It also requires splitting up your financial obligations. You'll be better off in the long run if you can deal with credit and debt issues with a good financial plan and a cool head.