Divorce debt

Money Problems from separation

Unfortunately nowadays the spectre of outstanding debts through separation or divorce is almost inevitable; our economy is driven by the ever tantalising prospect of having something today on credit instead of waiting until you have saved enough to buy without borrowing. Even today in the current post ‘Credit Crunch’ era, availability of credit is widespread, albeit somewhat harder to obtain, and our desire to ‘buy now, pay later’ remains unabated.

However, even the most cautious of borrowers can find themselves in difficulty through the trauma caused by separation and divorce.

Debt counselling and support

There are ways you can deal with the financial implications of a break-up of a marriage that will lessen the trauma of divorce or separation. This section of the web site is intended to help couples back on the right track.

If you, your partner, a friend or relative are suffering the impact of debt through divorce or are in the midst of a separation, then the specialist debt counsellors at National Money will able to help you find the best way through the crisis.

This new section of the website provides a simple, easy to understand guide to help you through the financial process of splitting up when divorce or separation is the only option. Our debt solution team will provide all callers with all the strategies that will be critical to minimise the debts incurred through divorce or separation.

The section looks at debt after divorce as we cannot claim to be experts in the legal aspects of the divorce process.

As anyone who has ever been divorced will know, the process can leave both parties heavily in money problems. Certainly the emotional side of divorce can take a heavy toll, and there are few who have entered this process who have not suffered severe stress. Divorce and separation account for 52% of serious stress.

However, the financial process can be one of the most stressful aspects of separation, and dividing up any debts from the marriage can leave a huge dent in your bank balance.

The strain of Britain’s 160,000 divorces each year is not just stressful; almost half (45%) those surveyed suggested that relationship break up caused more money problems than bereavement or redundancy. Relationship break ups also uses up personal savings as well, with 36% of people surveyed becoming heavily in personal debt as a result. 30% of divorcees stated that they needed professional debt solutions and advice, while 28% found it hard to adjust to having just one household income and 10% had difficulty sorting out their debts and had to consider bankruptcy. The research carried out by Divorce Aid has shown that the cost of divorce can leave couples heavily in debt and sometimes becoming an ex partner also brought out the need to spend money on themselves, with 15% saying they had utilised credit cards to purchase holidays or luxuries they would not have bought if still married. This can be a very sore point during the divorce process; emotionally understandable, but financially disastrous.

Only 8% of people surveyed said they had managed to control their finances and had come to an amicable agreement on finances, even though more than a quarter said they wished they had. Of the 78% who ended their marriages amicably, almost all said that their finances now needed a makeover. A typical divorcee has between £15,000 and £25,000 in unsecured debts, while half of people had debts of £2,400 to £6,000 due to the costs of setting up a new home. Many of the people interviewed had chosen to enter into an Individual Voluntary Arrangement (IVA) which is a softer alternative to bankruptcy and can massively reduce debt levels.

Rebuild your credit history

• 1. Looking closely at issues involving credit.
  
  Understanding the different kinds of credit accounts opened during a marriage or relationship may help you to understand the potential benefits and pitfalls of each. Whether you are married or single, you alone are responsible for paying off the debt; a joint account debt is the responsibility wholly of each of you, under a legal term known as ‘joint and several responsibility’ which makes each of you responsible for the full amount of the debt.
  
  No matter who handles the household bills, you and your spouse are responsible for seeing that those debts are paid. A creditor who reports the credit history of a joint account to credit bureaux must report it in both names. Because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don’t pay them can damage their ex-partner’s credit histories on jointly held accounts. If you’re considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it’s important to make regular payments so your credit record won’t suffer. As long as there’s an outstanding balance on a joint account, you and your spouse are responsible for it.
• 2. The account will appear on your credit report, and may appear on the credit report of any “authorised” user – important particularly regarding credit cards.
  
  If you are not employed outside the home, work part-time, or have a low-paid job, it may be difficult to demonstrate a strong financial picture without your previous spouse’s income, and we have seen many instances where debts which were affordable with 2 incomes are no longer sustainable on only one income.
  
  By opening an account in your sole name, no one can negatively affect your credit record.
• 3. If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorised user. Alternatively ask the creditor to convert these accounts to individual accounts.
  
  A creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. Further, bear in mind that if there is a debt outstanding and the creditor is aware of conflict between the account holders, the creditor would be entitled to ‘freeze’ the account (stop all activity on it)in order to stop the debt rising and demand immediate repayment.
  
  A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit.
  
  In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.

For couples thinking of divorce

Our debt solutions advice team can discuss official ways of helping you become debt free such as Debt Management Plan (DMP) an Individual Voluntary Arrangement (IVA) or Bankruptcy.

Some of the advice team workers have actually come through the stresses and strains of relationship breakdown and divorce, so can really empathize with clients on all topic relating to money problems.

The advice team workers can provide advice for people who are divorcing or planning to divorce, but also for individuals who have already divorced on credit repair. Amongst all the emotion surrounding this life changing period, it is key to find the time to plan and consider options with regard to money problems – call us now on 08448 247 260 and we’ll take you through the solutions available, or Request a callback and one of our friendly team members will call you back at a suitable time.