Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for CreditCards.com, and also writes regularly for MSN Money, Interest.com and Bankrate.com, and has guested on Martha Steward Radio and other programs. See her website SallyHerigstad.com for more personal finance tips and free budgeting worksheets. Ask Sally a question, or read her previous answers in the To Her Credit archive
Dear To Her Credit,
I am going through a divorce.
After being a stay-at-home mother for seven years, I am seeking employment. I
have four credit cards with long great histories, and my credit score is 817.
I am currently living off my credit
lines, but I need more credit to cover lawyer fees for a short period of time.
Is it better to open a new card or to request credit limit increases from my existing
cards? I have cards from Citi, Chase, Gap and one from Care Credit to cover medical expenses. -- Amy
Dear Amy,
Your credit score is very high! A
score like that can help you by making it easier to move if necessary, get more
credit or even get a job. If you run your credit cards up, however, your credit
score could be endangered. That's one reason I urge you not to live off your
credit cards or use them to pay legal fees, except as a very last resort.
I often get letters from readers
who wish they were back where you are now -- with a squeaky clean credit history and credit limits that are not maxed out. Once they've run up their
cards, their debt is a heavy burden. It's amazing how quickly the balances can
go up until you can't see any way out. You don't need that added stress now!
The first thing you should do is
start getting checks for living expenses from your husband so you're not living
on credit cards. A lawyer or a low-cost legal service should be able to arrange
that for you very quickly.
Next, find some way to pay legal
expenses until your divorce is settled. You are asking if you should get new
cards or request credit limit increases on your existing cards. I don't think
it matters which cards you use (assuming the terms are equal) -- piling on
credit card debt is a terrible idea. Instead, look at other options for paying
your legal fees.
1. Plan for a low-cost divorce.
I know someone who bought a $24 do-it-yourself divorce kit and filled in the
blanks herself. Every time her husband balked, she asked, "Can you afford
a lawyer?" They split everything up with other costs except the filing
fees at the courthouse.
Most people need more legal help
than that, especially if they have been married a long time, have children or
if one spouse needs support. If you have any doubt about needing legal help,
you should get the best you can afford, especially if you have children.
The best help is not always the
most expensive, however. You may be able to cut down on legal expenses by
working with a divorce planning professional before you hire an attorney. Lisa C. Decker, a certified divorce
financial analyst, helps clients with pre-divorce planning. She says, "If
they can work out the financial and children's issues on their own, they likely
have nothing left to fight about. They can save thousands and thousands of dollars
in the divorce process by then taking the agreement they have worked out with
their spouse to an attorney to draw up the legal documents as an uncontested
divorce." Decker keeps argumentative spouses on track by acting as the
voice of reason. "It's hard to fight the reality of the numbers in black
and white," she says. "I ask clients or their spouses, 'Do you want
to put money into your own retirement or your attorney's retirement?' or 'Do
you want to fund your children's education or your attorney's kids' education?'
That usually brings them back to reality in an emotionally charged situation."
Find a lawyer who charges
reasonable fees and will discuss fees ahead of time. Some lawyers even charge a
flat fee so there are no surprises. A high-priced lawyer is not necessarily
better -- it pays to shop around.
2. Ask your lawyer about payment
arrangements. Yours is not a unique situation. However, lawyers are not likely
to defer all payments until the divorce is finalized because the chances are so
high that they may not get paid at all that way. "The typical story goes
along these lines," says Joshua P. Friedman, a collections attorney in Los
Angeles. "Wife hires the attorney, makes a few small payments, but then
cannot afford to make more payments until the divorce is finalized and the
separation of assets and spousal support is finalized. The wife explains the
situation to the attorney. The attorney agrees to defer payment until the
divorce is finalized. The then ex-wife does not pay the attorney."
Assuming the attorney has received some fees, Friedman suggests, "A fairer
policy...would be to pay a small monthly retainer (say $1,000 or so, depending on
the monthly attorneys' fees bills) and have the balance of the legal fees
deferred until after the divorce is finalized. I would have trouble imagining
any family law attorney that would reject that."
Attorneys in most states are
prohibited from taking their fees out of the divorce settlement.
3. Your lawyer may be able to
arrange for your husband to pay the legal fees. "In Florida, if one party
is the main breadwinner, the other party may petition the court for a temporary
award of attorney fees," according to Shane Fischer, an attorney in
Florida.
4. Your parents or someone else
who is close to you may be willing to make a short-term loan to you. I'm
generally reluctant to recommend personal loans, but your parents have a vested
interest in seeing that you and your children get good legal help and financial
support. At least your parents won't charge you high interest fees, and if you
expect a good settlement, you should be able to pay them back quickly. Do not
choose this option if it will be a hardship for them or endanger their
financial security.
Your
credit score is one thing you have going for you right now. Take care of it!
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Divorcing? Your kids don't need a money martyr – Sally sharply arches her eyebrow at a one-sided divorce settlement that gives him the house, her the debt -- and a self-imposed college fund obligation on top of it all ...
Stuck with card debt with no job, assets – She has no work or personal property and cannot afford to pay her card bill. Can she still be pursued for the debt even if she has nothing? ...
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