Finances and Divorce - 5 Questions and Answers
From time to time, I receive questions on how to deal with money during a separation from your spouse. In this article, I'm going to disclose the most common questions I receive about money during a divorce.
Finances and Divorce
What if I have a divorce decree?
Before you go to court, try to decide who is going to pay what. If your spouse is going to live in the home, then he or she should pay. This applies to your car as well. After the court case, send a copy of the divorce decree to all lenders. If your spouse violates the decree, talk with a divorce attorney about your options. Even if you have a decree stating one spouse should be required to pay certain bills, you are still responsible for paying that bill back to the bank because you and your spouse's names are both on the original contract.
What if my spouse files for bankruptcy?
Your spouse can file bankruptcy on his or her portion of the debt, and leave you hanging with the entire amount. To counter his or her actions talk with your bankruptcy lawyer about the Bankruptcy Reform Act of 1994. This law has made it hard for a spouse to eliminate debt owed under a property settlement agreement. If you feel that your spouse can pay their part, have your bankruptcy lawyer file an exception to the bankruptcy proceedings.
Finances and Divorce
What is the Innocent Spouse Rule?
This happens when a spouse signs the tax returns not knowing what it contains, then they get divorced. The spouse can be held liable for any back taxes that are generated from that tax return. The innocent spouse relief law was enacted to fight this and to assist the spouse that had no idea of what was in the tax return. For more information, see IRS publication 971
What if I live in a community state?
If you live in a community state, you and your spouse automatically become joint owners when a credit card is open. Here is a list of those states.
- Arizona
- California
- Idaho
- Louisiana
- Nevada
- New Mexico
- Texas
- Washington
- Wisconsin
- Alaska
Finances and Divorce
What if my spouse passed away?
If your state is not a community state, the creditor will want a copy of the death certificate along with monetary funds from your spouse's estate to pay the bad debt. Make sure you send a copy of the death certificate to the credit bureau to avoid your spouse's identity from being stolen. Most of the time, the Social Security Administration will notify the credit bureau of your spouse's death, and they will flag his or her account.
I hoped this article was helpful to your situation. Now that you are empowered with more information, go out there, and take action.
Questions and Answers
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