“Give to everyone what you owe them: If you owe taxes, pay taxes; if revenue, then revenue; if respect, then respect; if honor, then honor. Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law”. Romans 8:7-8 (NIV)
Separation or breakup is never easy. “What’s mine is mine” and “what’s yours is mine” does not work in this day and age of a breakup. When dealing with these issues, the most logical and clear course is to try to come together in agreement, if possible. The breakup is devastating enough and the last thing anyone needs to have is a “jacked-up” credit. Now is not the time to hide your head in the sand, but it’s time to be realistic and focus on getting your financial house in order. So before you run to the border or escape to peaceful waters, here are four important steps you may want to take into thought now that the relationship is ova!
Get your Bank Accounts in order
News flash! If both of your names are on a bank account, then both of you are joint owners of the account. It makes no difference who opened it, or who deposited or contributed the most in it. The joint account is visible for either partner so either partner can write checks, withdraw or make any transaction on the account without the other person’s consent or knowledge, unless the account was set up to require both parties to sign. (Wished I had done this). If the relationship ended amicably, then there should be some serious communication about how to divvy up the remaining funds and balances. Banks require either of the account owners to show up in person to close the account. Joint accounts must have a zero balance in order to close it.
Take time to cancel automatic payments, change pin numbers if necessary, and change beneficiaries. If you had a not-so-trustworthy partner and there is a dispute about who gets what, get legal counsel as soon as possible.
Credit Card Accounts
If both of your names are on a credit card account, then both of you are responsible for paying back the remaining balances. Credit card companies don’t care if you are going through a breakup! They only care about the balances and they will take you to court if necessary. Credit card companies make most of their revenue from the interest on the balances each month. So the longer you drag this out and forgo payment, the more interest you will be charged and the more it will affect your credit. Annual fees will continue to be added also. It’s best to pay off the remaining balance together or divide up the remaining debt and open up new credit card accounts and transfer balances.
Even though you are going through this emotional time of breakup and decision making, trying to remove your ex-partner from the mortgage is another added burden of challenges. The shuffling of who decides to keep this or that is heartbreaking. Another news flash… the mortgage lender does not care who decides to keep the house, both parties are still liable for the life of the loan. You don’t want to throw your hard-earned investment into foreclosure. If in agreement, your spouse can sign a quitclaim deed to remove their name from the title. Difficult decisions must be made. However, the best advice is to get counseling from a divorce attorney, mortgage broker or financial planner.
Maintaining good credit
Maintaining good credit is the primary scale that financial institutions use to measure your creditworthiness. If you have a low credit score, your interest rates will be much higher and it limits your credit line availability. However, the higher your credit score, the better your chances will be for a lower interest rate and a higher line of available credit. Now that your household income has been reduced, keeping up with the “Jones” is no longer an option.
It is crucial for you to keep track of your credit score. Out of revenge, your ex-spouse could still get credit in your name and ruin your livelihood. It’s no fun making all these payments back alone. Make sure you dissolve all joint accounts and/or remove their name as an authorized user on the credit cards and accounts. Change account numbers, new PIN numbers, new credit cards, and do a follow up. Notify credit companies of any fraudulent charges or activities.
Are you someone who is dealing with the burdensome weight of debt? Maxed out credit cards, defaulted loans, ballooning interest, and demands for payment can all take a toll on even the strongest among us. The wonderful news is that there is hope! You can reduce your debt and rebuild your financial life for the better. “Breaking Debt” contains the smart tips you need to get out and stay out of debt for good! Inside you will find everything from learning how to pay down credit card debt to make smarter borrowing decisions.
Don’t ignore your financial debts. These debts are not going to go away by themselves. Your creditworthiness is at stake. Establish creditworthiness by paying your bills on time, pay down on high-interest loans, reduce balances, pay more than the minimum payment, and get current on late payments or set up payment plans. Some credit card companies will work with you. Get on a budget plan. Manage your money wisely.
Beware of obsessive spending habits: compulsive shopping, excessive gambling, binge drinking, irrational impulses and purchases, drug abuse and credit card abuse. Stay out of unnecessary debt! Get professional counseling.