The divorce was complicated. You’re still experiencing emotional turmoil, and you most likely don’t want to think about logistics after divorce. With that being said, sorting out your finances will help to avoid unnecessary complications or potential misunderstandings. You may have already created your separation agreement, which outlines your main assets like the matrimonial home, vehicles, and investments - but there are also smaller things such as utility bills, credit card debts, and bank accounts that need to be adjusted to your new situation. These items are all too often neglected. In order to assist in your post-divorce transition, we have listed a few financial considerations to keep in mind after you and your spouse divorce.
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Who pays the bills?
Unless otherwise stated by a judge, both spouses are entitled to live in the house, regardless of whose name is on the deed. This means that even if your spouse owned the house on the date of separation, they most likely do not receive any credit for it. Spouses often need time to prepare another space, or cannot afford to move out right away.
So, who pays the bills? It all comes down to the name that is on the bill. If both spouses are listed on the bill, both spouses have a legal responsibility to pay it. So if both spouses live in the house, they can split utility bills equally. However, if one spouse does not live there anymore, often times they continue to pay the bill until their name is removed from the account, and ask to be reimbursed at a later date.
On the other hand, if you are the only one on listed on the utility bill, only you are legally responsible for paying it. With that being said, if your ex-spouse is still living in the matrimonial home, and their name is not on the utility bill, they pay for the agreed upon portion of their living expenses.
If your spouse is unable or unwilling to pay, you can ask the judge to make an order. You will either receive help to pay the expense for the meantime, or the judge will order one spouse to pay all the expenses.
Lastly, if both spouses are in a financial situation where they are unable to pay, selling the home is an option. If you and your spouse do not agree on the terms of the sale, a judge can set the conditions and order the sale. Also, spouses should divide all expenses spent on preparing the house for the sale, as the sale benefits both parties. Be sure to keep all of your receipts for reference in the future.
The mortgage is also an issue that many spouses struggle to resolve during divorce. Mortgage payments can be treated the same way as utility bills, where the legal homeowner would continue to make the mortgage payments. However, if you would like to keep the matrimonial home as an asset, you can split mortgage payments equally, even if you do not live in the house anymore. Remember that since both people are entitled to 50% of the equity of the house, one party may buy out the other and therefore assume all responsibility for paying the mortgage.
You and your spouse can be unconventional when deciding who should pay for what expense during this time period. As long as you and your spouse understand how everything is being split, your opportunities are endless. For example, if one of you are paying more of the mortgage, you and your spouse can split the utility bill unequally as well. If you and your spouse cannot agree on a payment plan, you can ask a judge to make a decision for you. It is important to remember that judges are limited in what they can do. We recommend that you be patient, brainstorm feasible solutions with your spouse, and try to work out disagreements on your own before you bringing your case to the courts.
Revisiting your debts
It’s a good idea to revisit your separation agreement to verify that the debts you are responsible for, and that the debts listed in the separation agreement are identical. Make sure that you are paying off the debts that are in your name, and sharing the debts that are in both you and your spouse’s name. Remember that second cardholders have equal responsibility to pay off credit card debt.
If you notice inconsistencies between the debts on the separation agreement and the debts you are currently paying off, remove your name from those debts. Nevertheless, there is a possibility that the creditor will not allow you to remove your name because your spouse is not qualified to carry the debt on their own.
Rebuilding your credit rating
When spouses split, it usually results in a smaller pool of financial resources for both individuals. More often than not, money is spent more carefully, and credit card debts are more difficult to pay. As we outlined above, it is important to be aware of where your name is found on bills and mortgages to ensure that payments are made on time. Even then, slip-ups and late payments happen sometimes and your credit rating lowers because of it. Building a good credit score will help you financially in the long run, so it is important to start rebuilding your credit rating. If you have never built a credit score under your name, now is the time to do so.
Check over your credit report and make sure that you are unattached to your previous spouse’s accounts; contact your credit bureau if anything needs to be changed. If you didn’t previously own a credit card, you might consider applying for one to start building credit. Remember to use your credit card wisely, and only use it to make payments you can afford. By paying your credit card bill on time, and gradually paying back your debt, you will see your credit rating rise.
Your insurance plans may be affected after a divorce so it is wise to inform yourself on the effects that divorce has on different types of insurance. Stay tuned for our upcoming blog post on insurance.
At the end of the day, divorce is a difficult process that will take time and energy to complete. Although bills and debts are important to keep in mind, remember to make time for yourself. Thistoo aims to simplify the logistics so that you can focus on the more important things in life - your health and happiness.