Protect your credit score during divorce
There are ways to prevent racking up debt during this difficult time
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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
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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