Thursday, August 12, 2010

Protect Yourself From Debt During A Divorce

By Karen Jones

When people get a divorce they are aware that any assets will need to be split, but more often than not, they do not realise that any debts t need to be split too. How these debts are split will seriously affect their future, so it is important that they obtain good legal and financial advice from the outset.

The first step in managing the issue of debts left over from the marriage, is to write a list of all your outstanding bills and assets. Also, make a comprehensive list of all of your partner's debts and assets. Pull together all documentation that you have which relates to these debts and assets. That list and the related documents will help a lawyer to give you sound advice on how to deal with them.

Take action to prevent yourself or your spouse from increasing those debts. It is far better to do this amicably, if you can. Talk to your partner about the need to protect each other and the steps that need to be taken to do this.

Any joint signatory accounts, credit or store cards should be frozen or cancelled, as soon as possible. That way more debt cannot be accrued on them. Do not leave joint accounts as they are. An amicable divorce can quickly turn nasty. Make replacing joint accounts a priority.

Freezing a joint account is not always practical, because if you suspend a joint account neither partner can draw on the funds in that account. Also, any bills that are on direct debit from that account will not be processed. A more practical approach is to ask the bank to change the account, so that withdrawals above a certain amount can only be done with both signatures.

Immediately opening separate accounts is the best option. It allows any joint accounts to be closed quickly before problems arise. New direct debits can then be set up to pay the essential bills such as the mortgage, rent and services bills from the new accounts. Bear in mind that not paying these bills is counter-productive and can lead to the loss of the home or services and adversely affect both partners credit ratings.

For credit cards and store cards, the main account holder is liable for the debts even if a former partner runs up that debt. If there is nothing owing on the card, cancel it straight away. If you owe money and can afford to pay off the debt and cancel the card, do so immediately. Failing that have the credit limit reduced to the lowest level possible. Tell the credit card company of your circumstance, most firms will give you another card immediately. Thus enabling you to cancel your existing card without the risk of being many weeks without a credit card.

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