Divorce is already stressful enough without adding unnecessary financial complications to the mix. Even at the best of times, money can be a touchy subject, and when you take into account the emotional upheaval that many divorcing couples go through, even amicable splits can get nasty.
The good news is that this doesn't have to be the case. If you can keep a calm head, you can avoid making rash economic decisions or even failing to tackle important tasks at all until it's too late. You can focus your efforts on the two most crucial issues and untangle your finances from those of your ex as smoothly as possible. The two key financial areas are your home and your credit accounts.
With the house you share – or shared – with your spouse, you have three basic options:
- One spouse purchases the home from the other.
- You sell the house and divide the proceeds.
- You continue to co-own the house.
Typically, one spouse buying the house from the other involves refinancing and whichever spouse is hoping to purchase it being able to qualify for a loan. Unfortunately, this sometimes turns out to be unfeasible, regardless of intent, if that spouse cannot afford to solely take over mortgage payments. This outcome frequently leads to a decision to sell and split the proceeds. While this second option can be difficult emotionally, it's often the simplest approach.
The final approach might sound easiest but, in fact, may be the most difficult.
If you and your spouse decide to continue jointly owning the home, you'll want to be very clear when drafting a co-ownership agreement during divorce proceedings. The document will need to cover all contingencies, including what will happen if either ex faces a period of financial difficulty, how and who will handle taxes and maintenance, and a variety of other issues.
Your credit accounts
If all your accounts have been joint up to now, you'll want to apply for an individual one as soon as possible, preferably while you can still use joint income to qualify.
After drafting a budget based on your projected post-divorce income, you may wish to discuss Texas's laws on debt responsibility with your lawyer, and consider handling existing credit accounts in one of the following ways:
- Agree to pay off joint accounts and close them now.
- Agree to close joint accounts now but pay them off later.
- Do nothing.
The least-risky approach is closing all joint accounts before you've finalized divorce proceedings. You would do so by paying off balances and having each spouse remove the other as an authorized user on individual accounts. This ensures that one spouse cannot affect the other's credit rating if he or she runs up charges later or fails to make payments. However, finding the funds to fully pay off balances is not always possible, which leads to the second -- albeit riskier -- option of paying the accounts off later.
You and your ex can close any joint accounts and remove each other as authorized users, then negotiate existing balances during you divorce proceedings. This stops new charges from affecting you but still carries risk, as creditors may try to hold you responsible if your ex fails to pay prior joint debts, regardless of any divorce agreements. You may consider insisting on a transfer of your ex's portion to new, individual accounts. You can also choose to do nothing, but this option holds the highest financial risk for obvious reasons.
Every divorce is different, so depending on your financial situation, there may be a number of other considerations as well, from investments and retirement accounts to pensions and more. However, there are professional resources in the Dallas area that can help guide you through your divorce every step of the way, and with experienced counsel, you'll soon be on your way to a more stable future.