How Divorce Impacts Your Credit

How Divorce Impacts Your Credit

By M. Scott Gordon

Divorce is a life changing event that can have a serious impact on a person’s financial circumstances. With issues of property division, and spousal or child support, a divorcing spouse might find themselves asking how divorce will affect their finances. With this, one of the first financial questions a person going through a divorce might ask is how divorce will impact their credit.

By law, a person’s marital status is not a factor in calculating his or her credit score. Therefore, getting divorced technically does not in itself have an impact on either spouse’s credit. It is the financial issues encountered in the divorce that can affect credit.

Debts Handled In The Divorce Decree

Couples often have joint credit accounts during marriage. When a couple is divorcing, if there are any debts on these accounts, the couple can come together and decide which person is responsible for the debt. This agreement is written into a Marital Settlement Agreement, which is then reviewed and entered as a court order and part of the divorce decree. Even if the parties do not independently agree, a judge can divide the marital debts among the divorcing couple. If each person follows the court order and pays off their portion of the debts on time, and all joint accounts are cancelled or changed into individual accounts, the divorce should not affect either spouse’s credit. 

The Effect of Joint Accounts

Problems arise when the debts from joint credit accounts and obligations, such as mortgages, are not paid off. With a joint account, the people whose names are on the account have a contract with the creditor. Even if the judge orders one person to pay debts that were acquired during marriage, this does not take the other person off the contract with the creditors. If the accounts are left in the names of both spouses after the divorce, one spouse can run up the debt and fail to pay it. This failure to pay negatively impacts both spouses’ credit scores.

One way to avoid this is to try and get your name off any joint accounts before the divorce. If this is not possible, then you can attempt to do so after the divorce. If you try to get your name off a credit card account, for instance, you may need to pay off any outstanding balances, or get your spouse to accept responsibility for the account. You should contact your creditors to find out how to remove your name from a joint account.

It may be more difficult to separate larger credit accounts such as mortgages. With mortgages, you may need to refinance the property to remove one spouse from the mortgage. In most cases, you may not be able to convert the mortgage to one person’s name due to some special circumstances. If this is the case, you and your spouse may need to work together to ensure the mortgage payments are made on time to avoid negative credit impact.  If one party is to assume the mortgage and buy out the other spouse, it is critical to have guidelines as to how the spouse assuming the debt will re-finance the mortgage.

Contact an Attorney

If you are going through a divorce in Chicago, Cook, Lake or DuPage counties and want to better understand how it will affect you financially, contact the Chicago area divorce attorneys at M. Scott Gordon & Associates, and see how we can help and support you through the divorce proceedings.

 

How to Handle College Expenses after a Divorce

How to Handle College Expenses after a Divorce

By M. Scott Gordon 

With annual tuition costs ranging from over $15,000 for Illinois in-state tuition to over $40,000 at a private university, paying for a child’s college expenses can be quite expensive. Parents may have some savings set aside to pay for college, but these do not always cover all the costs of a college degree. Taking out student loans may be one way to pay for the expenses, but that may saddle a college graduate with a large unmanageable debt after graduation. Therefore, whether you have teenagers about to go to college, or younger children who may not go to college for a few years, college education funds may be planned for in a final divorce decree if you and your spouse decide to separate.

Funds May Come from Both Spouses

According to section 513 of the Illinois Marriage and Dissolution of Marriage Act, a court can allocate finances from either parent’s income or property to pay for their children’s educational expenses. The court can order financial contributions for tuition, books, room and board and other similar educational expenses, and also for medical and dental insurance coverage.

In determining how to allocate expenses between the parents, a court considers the following factors, amongst others:

·         The parents’ financial resources;

·         The child’s standard of living, had the parents stayed married;

·         The child’s financial resources; and

·         The child’s academic performance.

Who Can Ask For Financial Contributions?

Petitions for financial contributions can be made by either parent during a divorce and after a divorce.

When Can Petitions For Financial Contributions Be Made?

 A parent can ask the court for educational contributions during the divorce, but can also reserve a petition until later after the divorce petition has been finalized. A parent seeking to reserve the issue of college financial contributions should be careful about when they later ask the court to order the contributions.

According to the Illinois Supreme Court, a parent who petitions a court for financial contributions is only entitled to assistance for expenses that come after the petition. That means that if a parent starts paying for college expenses, and then makes a petition for a court to order the other parent to contribute, the court can only order the other parent to contribute to future expenses. The petitioning parent has to bear the pre-petition costs alone.

Contact an Attorney

If you are going through a divorce and need assistance working out the details of your children’s educational expenses, contact M. Scott Gordon & Associates, and see how we can help you in this important aspect of your divorce. We are located in Skokie and in Chicago, and we are prepared to help you today.