8 Tips for Protecting Your Money for Divorcing Couples
If you’re getting a divorce, you need to think about protecting your personal finances. 
Before the money tips, a quip:
“Ah, yes, divorce…from the Latin word meaning to rip out a man’s genitals through his wallet.” ~ Robin Williams.
Ouch – and many husbands and wives would agree that divorce wreaks havoc on personal finances and retirement plans! According to the experts at Bills.com, one million Americans divorce every year. More than 80% of divorcing couples cite “debt and financial distress” as the primary reason their love relationship failed, according to an American Bar Association survey. Research shows that most families suffer a financial decline following a divorce.
For more in-depth financial advice for divorcing couples, read The Complete Guide to Protecting Your Financial Security When Getting a Divorce
8 Tips for Protecting Your Money for Divorcing Couples
1. Assess your debts and liabilities with a credit report. First, you need to see yourself as your creditors do. Online (go to MyFico) or by phone, you can request a “tri-merge” credit report (a summary from all three major credit reporting bureaus). Make a note all of your existing shared and individual liabilities. Settle (or get a judgment) on how you’ll allocate these responsibilities.
2. Plan how to handle your home mortgage loan. If you own a home, the mortgage is likely your most significant monthly payment. Be certain you understand how you’ll resolve monthly mortgage payments, and how you’ll divide the home’s value – whether one partner buys out the other now, or the home is to be sold after children are grown. Divorcing couples need to protect their money by thinking long-term.
3. Budget for bill payments, loan payments, credit card debt, etc. Create a detailed budget, based on your new income level, and use free cash flow to pay off debts. Most people find the most efficient way to pay off debts is to first pay off smaller bills – starting with under $100 – then pay off loans and unsecured debt, such as credit cards. An effective way to reduce debt is to pay off the debt that has the highest interest rate first.
4. Make sure your ex is making his or her payments. If possible, make provisions in the divorce agreement for reporting on resolution of significant debt. There are important implications for you personally if your spouse does not meet his/her end of the bargain on liabilities allocated through the divorce proceedings.
5. Call all creditors for shared accounts (credit cards, gas cards, department store cards, phone cards, etc.). Close the accounts if you are not carrying balances, or remove your name from jointly held accounts. Remember that for jointly held credit cards, and for any other debts incurred during the marriage in community property states, you have shared liability – and thereby share any potential negative credit rating impact. This means that if your ex-husband or ex-wife doesn’t make payments after the divorce, it could come back to haunt you – and your credit rating.
6. If you owe back taxes, be aware that the IRS does not have to honor a decision from a divorce judgment. This tip for protecting your money for divorcing couples may involve consulting a tax expert to help with your divorce tax planning.
7. Focus on rehabilitating your credit and financial health. Getting a divorce isn’t just about letting go of someone you love — it’s about rebuilding financially with a savings plan. Reinvest any proceeds or equity that come out of the divorce proceeding, and be especially cognizant of building yourself a retirement fund for the future. You may need to start over.
8. Consider hiring a debt resolution firm. If you find yourself in financial trouble because of the divorce, seek help immediately from a reliable, professional debt resolution firm. Be sure to investigate the company you choose to assist you, and seek out a company that operates for the consumer, which is markedly different from credit counseling, debt consolidation, and debt management firms.
If you have any questions or thoughts on these tips for protecting your money for divorcing couples, please comment below…
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