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Protect your credit during a divorce

Take steps to make sure the division of debt is fair

By

To Her Credit
To Her Credit, Sally Herigstad
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 Stewart 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
Question for the CreditCards.com expert

Dear To Her Credit,
I'm going through a divorce that I didn't see coming. My husband's financial plan is to have me leave the house and get a place elsewhere while the process is going on. After which, he wants to keep the house long enough to stay there and make no payments, and then walk away from it when the bank initiates foreclosure proceedings.

The house was a foreclosure to begin with, and we have had to fix so many things that I feel this is not wise. With both our names on the title, this will mess up our credit even more as we are just coming out of a bankruptcy back in 2002.

Unfortunately, I won't qualify by myself to refinance and get his name off the title. In its current condition, we can't really sell the house, either.

We don't have a lot of bills, just my $3,000 student loan, a $1,000 personal loan, his $5,000 vehicle loan and $3,000 in credit card debt. I could make sacrifices and pay the personal loan and vehicle off in less than a year. (The card is his problem -- he got that behind my back and my name is not on it.) If I got those extra payments out of the way, I could take over the house payments on my own and keep the house.

But if I have to move out of the house, most of my money will go to rent. Since he's in such a hurry to get the divorce and doesn't really want to see my face around, I have asked him to move out instead and stay with his brother. The kids (16 and 13) could stay at the house with me. Whenever the house sold, I'd share half the profits with him.

Am I being unreasonable here? I am just not looking forward to another 10 years or so in another bankruptcy. To me, that's not the way to start your retirement. Thanks. -- Alison

Answer for the CreditCards.com expert

Dear Alison,
Under normal circumstances, a spouse cannot force you to move out of the house you own jointly. Nor can he force you to file for bankruptcy again. Jeena Cho, a San Francisco bankruptcy attorney at JC Law Group, says, "A husband can't force a wife to file for bankruptcy. She would have to physically sign the bankruptcy petition."

I don't see any reason you should even be in danger of bankruptcy with only $12,000 in nonmortgage debt between the two of you.

Nevertheless, if you don't take action to protect yourself, and your husband follows through with his destructive plans, you will surely lose your house and your credit one way or another before this is over.

The first mistake many people make is to believe everything the spouse who wants to end the marriage says. Maybe it's in the hope things will work out, or perhaps they can't believe their long-term "for richer, for poorer" partner could not be trustworthy. Some spouses, upon being told to get out, simply do so. I've even heard of one spouse telling her there's a restraining order against her -- and the traumatized spouse believed it without seeing one piece of paper as evidence!

Instead of moving out, you need to get advice from a family law attorney in your state immediately. Once you're out, it's much harder to get back in.

As far as the other debts go, you seem in a hurry to pay most of them off yourself. Your husband's vehicle loan, however, is attached to the vehicle. Why should you pay for that? Again, talk to your family law attorney before you part with any money to pay off marital debts. You need your money to take care of yourself and your children. Don't try to be the nice person and fix everything. 

It sounds like you'd prefer to keep the house. That would certainly be less disruptive to the kids. Your husband's plan of living in it until it's taken away sounds most unfair to them, as well as to you. Does he think the teenagers won't find out that the house is being foreclosed on and being taken away? How unsettling is it for a kid to think that one day -- who knows when? -- they're being kicked out of their home? It sounds like the stuff of nightmares to me. In some cases, such a situation is unavoidable, but I certainly wouldn't call it much of a plan.

On the other hand, if your budget as a married couple was stretched to the limit, keeping the house long-term may not be possible. Cho says, "As a practical matter, though, can (she) realistically afford to pay the mortgage payments and other debts on her own? Does it make sense financially to keep the home? She should consider the value of the home versus the amount owed on the home. If it's underwater, it may not make sense to keep it."

Don't be so quick to dismiss the idea of selling your house. Houses do sell in various stages of remodel -- after all, you bought it "as is." It's much better to stay in control of the situation by putting the house on the market than to passively wait to be kicked out.

Your husband wants a separation -- let him leave. He can't expect to have everything. Get legal and financial advice immediately so you can support yourself and the kids.

These are hard times for you. I hope you can keep your home. However that turns out, take care, and know that things will get better. Good luck!

See related: 6 ways to protect your finances in a divorce, Divorce and debt: Advice on dividing up, paying off debt, Create a separate credit identity after divorce

Meet CreditCards.com's reader Q&A experts
Vexed by a personal finance problem? CreditCards.com's Q&A experts answer questions from readers every weekday. Ask a question, or click on any expert to see their previous answers.
Gary Foreman, New Frugal You columnist Gary Foreman,
"New Frugal You"
Sally Herigstad, To Her Credit columnist Sally Herigstad,
"To Her Credit"
Cathleen McCarthy, Cashing In columnist Cathleen McCarthy,
"Cashing In"
Jane McNamara, Let's Talk Credit columnist Jane McNamara,
"Let's Talk Credit"
Elaine Pofeldt, Your Business Credit columnist Elaine Pofeldt,
"Your Business Credit"
Erica Sandberg, Opening Credits columnist Erica Sandberg,
"Opening Credits"

Published: March 18, 2011



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