July 12, 2017
Dealing with debt during a divorce can be frustrating, overwhelming, and it can make saving money seem impossible. Your financial institution may or may not have the tools and tips necessary to help you manage your debt, so that’s where credit unions come in. Here are some ways credit unions can help you get rid of debt and start saving money again.
Legal Liability for Debt
It is common to think that debt created during a marriage will be divided according to the spouse that incurred it, but this may not be the case, depending on the state you live in. Both parties may be equally responsible for any debts, even if only one spouse created it without the other spouse having knowledge of it. Regardless of how the debt is divided by the court, banks still expect to be paid the full amount, in the name of the person who incurred it. For example, if you own a credit card under your name, but your ex-spouse used it for their purchases, you would still be responsible for your credit. If negotiations or agreements cannot be made between ex-spouses, legal action can be taken against the spouse who does not abide by the court order to ensure payments are made on the account in question. But, considering how long court cases may run, your credit may already be ruined by the time it is settled.
Solve the Debt Issue Before the Divorce
If you and your spouse are considering a divorce, you should solve the debt issue before filing and finalizing the decision. This is often a difficult task and requires teamwork, but it is necessary to prevent the innocent spouse from being stuck with a debt that doesn’t belong to them. In terms of credit cards, you may need to transfer balances to another credit card, or consolidate its balance with another loan. In the case of mortgages and car loans, these may require refinancing the loan into one person’s name (the person keeping the asset). Lenders provide couples in this situation with added flexibility such as allowing you to remove your name from the loan and putting your ex-spouse’s name on it instead. This option is typically available if the divorce has already been finalized.
Protect Yourself Against Future Debt
Leading up to and after a divorce, you should be careful about leaving joint accounts open. Credit cards or lines of credit that are left open are especially dangerous, as an ex-spouse will be able to transfer balances from their own accounts to ones that you hold together. Another way to protect your credit is to pay off the debts yourself and ask your spouse to repay you. If they refuse, you may want to go back to court to settle it, and this process can be expensive, but it will not damage your credit.
LUSO Federal Credit Union Can Help
Managing debt during and after a divorce can be stressful, especially if you feel like your bank cannot help you. Here is where a credit union like LUSO Federal Credit Union can help you. Our professionals can help you assess your debt and provide effective solutions or loans to keep your credit score up and help you regain control of your finances sooner. Our multitude of services include mortgage advising, manage finances, getting out of credit card debt, saving for future goals, and setting you up with the loans you need. Our services and rates are available to those who live, work, worship or attend school in Hampden County. Please contact our Ludlow branch at 1-(844) 587-6328, or our Wilbraham branch at 1-(800) 808-5876 to learn more.