By Angela Colley
The end of 2011 seemed to be all about the end of marriages. Last week alone, Newt Gingrich had to revisit his first divorce right before the Iowa caucuses, Mel Gibson lost half his $850 million fortune to his ex, Maria Shriver was rumored to be reconsidering her divorce from cheating hubby Arnold Schwarzenegger, and a 99-year-old man in Italy divorced his wife after learning she had an affair – in the 1940s.
When a good friend of mine went through a divorce last year, it didn’t make headlines, but it did make for tough times. She thought she was headed toward an amicable settlement. But as often happens, emotions ran high, and what started out as a seemingly easy split ended up being a financial disaster – one she’s still dealing with today.
There’s no shortage of divorce advice on the Internet and from attorneys. Some is good, some bad. But here’s what worked for my friend – and what she wished she would’ve done sooner. Take these steps to protect your newly single self…
1. Separate your bank accounts
At the beginning of my friend’s divorce, she decided to leave their joint checking account open because she didn’t want to seem spiteful. Unfortunately, her soon-to-be-ex-husband wasn’t too concerned with appearances. He cleaned out the checking account and her linked savings account – which she only found out about after having her debit card denied at a restaurant.
If you asked her now, she’d tell you it’s better to separate the checking accounts and deal with the fallout. Sure, her ex would’ve been angry when it happened, but they could have saved themselves a lot of fighting (privately and in court) had they just separated their money from the beginning. After all, she had to deal with a financial crisis, and her ex ended up having to pay back everything he took anyway.
When you decide to make the split, Kiplinger suggests withdrawing half the money from any joint accounts and placing it in your own checking account. And if you don’t have one already, see our banking page for tips on finding the right checking account.
2. Protect your credit
Those credit scores you spent years building will go kablooey the second your ex decides to go on a shopping spree and ignores the bill. You need to separate your credit and loan accounts quickly.
You may know all of your credit information, but you should still look at an official report. Order a copy of all three credit reports – TransUnion, Experian, and Equifax – and go over them carefully. Highlight the names and numbers of each creditor you share with your spouse.
While it may be the last thing you want to do, discuss credit accounts with your ex. Decide who keeps what and ensure both of you still have an open line of credit in case of an emergency.
Unfortunately, turning joint debts into single debts isn’t easy. You can’t just call the lender and ask to have a name removed. It generally means either paying off the debt, or having one party reapply and refinance it in their name alone. If they can’t qualify, the debt should be paid off, even if it means selling the house, the car or using assets to pay off the credit card.