The breakdown of a marriage can be stressful and challenging on a very personal level—it can also impact your financial situation. The work of rebuilding your financial life and protecting your credit can be made simpler with the help of a good financial advisor, but you can get started by taking these steps:
- Get a copy of your credit report and update it, removing accounts that are in your former spouse’s name only.
- Close all joint accounts. Send a certified letter with return receipt requested to the customer service department of the credit card issuers. Remember, you are still responsible for paying existing balances. Follow up by making sure these changes are reported correctly to credit bureaus
- Start to establish credit in your own name. Apply for a credit card and open a bank account in your name only.
- Adjust to life on a single income. Take a deep breath, gather your wits and create a new budget plan. Don’t succumb to “retail therapy,’’ the impulse to make yourself feel better by shopping. And don’t stop saving for retirement, even if you need to cut back temporarily.
- If you and your former spouse can’t agree on how debts should be divided, a judge may have to make the decision for you. Usually, each party is responsible for debt brought into the marriage, and debt incurred after separation, even before the divorce is finalized.
- If you’re used to doing your taxes on your own, consider using an accountant for at least the first year to help you manage the change in your filing status, any capital gains tax you may owe as a result of your settlement and any potential impact of child support.
- If you were covered under your former spouse’s health insurance plan, you may be eligible for COBRA coverage www.dol.gov. This may be especially important if you have a pre-existing medical condition.
- Change beneficiaries in your will, retirement plans, and life insurance policies.
- Update legal documents, including powers of attorney, and emergency contact numbers.
Do you have any savings, excluding retirement savings?1
- 66% Yes
- 34% No
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Source: Prepared for The National Foundation for Credit Counseling by Harris Interactive Inc., Public Relations Research, 2010