How Divorce Affects Your Credit and Finances
Couples that have commingled finances, bank accounts, intangible assets, retirement funds, and additional intellectual property will have difficult decisions to make upon divorce. Property division is one of the most time-consuming and contentious issues during divorce settlement and in negotiations between parties. While couples are relieved to see the marriage dissolved, separating finances, debts owed, and closing bank and credit card accounts can have a negative effect on each party’s credit score, credit limit, and financial health. Our attorneys at Eveland & Foster, LLC can provide guidance to clients wishing to avoid severe financial strain during the divorce process.
Drafting a Case Information Statement
In New Jersey, couples seeking divorce are required to file a case information statement with the courts. A case information statement is one of the most crucial pieces of evidence in a divorce proceeding. It details all monthly income, expenses, and a meticulous list of assets and liabilities. This includes gifts and personal property like furniture, jewelry and furnishings. It also includes a list of intangible property, like details regarding IRA, 401K accounts, bank accounts, credit card accounts, loans, mortgages, life insurance accounts and other assets and liabilities. Take account of all finances and fiscal items that require valuation and equitable distribution when drafting your case information statement, and be sure to review the other party’s statement for discrepancies.
Divorced parents also want to consider how they will continue to fund joint savings accounts, health spending accounts or 529 college savings accounts for their shared children. Who will bear the cost of providing health and dental insurance to children? How long is the ex-spouse eligible for COBRA coverage? Who pays for school tuition and extracurricular expenses? Usually these items are identified in the marital settlement agreement or parenting agreement. If you are not at that stage in the divorce process yet, contemplate how much you can afford to contribute given your separation. Also remember that the court will determine child support and alimony awards based on the monetary and non-monetary contributions of both parties, taking into account whether a stay-at-home spouse has the requisite education and/or work experience to find gainful employment, or if they are eligible for indefinite alimony. NJ. Rev. Stat. § 2A:34-23 (2020).
Determining Debt Owed and Property/Asset Division
The courts will evaluate debt based on the existing contract, loan agreement, or account statement, as well as how property is titled. For example, if a divorced couple has two joint checking accounts and one joint credit card account, they are required to visit each financial institution and either close the account entirely, splitting remaining balances or amount owed in principal and interest, or one party can assign all rights and interest in the interest-bearing, savings or checking account to the other party. Similarly, if both parties have individual IRA or 401K accounts with their respective employers, they may both choose to keep their individual retirement accounts in play. Regarding real property, parties can choose to rent jointly titled property, sell the property and equally divide proceeds, or the home can be re-titled and one party conveys right, title and interest in the home or rental property to the other.
Because the parties may be closing multiple bank accounts, lines of credit, or losing equity because of property division, their credit scores may suffer. Married couples who owned a business together and are now seeking divorce also want to consult with an attorney as soon as possible regarding implications and financial health of the jointly owned business. Some things you can do to prevent a hit to your credit is opening an individual credit card account and making on-time payments, agreeing to keep a joint account open in the interim, and being conservative about your spending habits or financing large purchases while your divorce hearing is pending. Also gather copies of financial documents, paystubs, bills, invoices and any prenuptial or postnuptial agreements you have regarding equitable division of jointly owned property.
Contact Eveland & Foster, LLC for Help
If you are contemplating divorce or in the middle of contentious proceedings, contact our attorneys at Eveland & Foster, LLC for assistance. We practice exclusively in family law and understand how to navigate the property division process. We can also provide guidance regarding your overall financial health and how to recover fiscally after divorce. We are conveniently located in Morristown, New Jersey, and serve clients throughout the North Central Jersey Region. Schedule a consultation today.