One of the often-overlooked aspects of a New Jersey divorce is the potential effect on your credit score.
What can hurt your credit score in a New Jersey divorce? Not surprisingly, the failure to pay credit card bills, car loans and home mortgages.
Many people who try to save money by handling their own divorces without a New Jersey divorce lawyer think that they will have no problem if they create Settlement Agreements in which their soon to be ex-spouses agree to be responsible for payment of specific debts that they both incurred during the marriage.
Sadly, that is just not true.
A Settlement Agreement which you enter into with your soon to be ex-spouse as part of your divorce does not affect your responsibilities to the creditor. Therefore, if your ex-spouse fails to make the required debt payment, it will adversely affect your credit score and the creditor can come after you for the payment.
Although after you make the payment you will be able to seek reimbursement from your ex-spouse, the damage has already been done.
And what if your ex-spouse declares bankruptcy and therefore is able to extinguish his/her responsibility to the creditor? The answer is that you are left “holding the bag” and—unless your Settlement Agreement has very specific language—the Bankruptcy Court may rule that your ex-spouse has also extinguished his/her responsibility to reimburse you for having to pay the debt that you thought was the sole responsibility of your ex-spouse.
What can you do to protect against these risks?
The best way is to not give into the temptation to save a little money by handling your own divorce. An experienced lawyer who devotes his/her practice exclusively to New Jersey Divorce matters can help you by pointing out all of the possible risks and suggesting ways to minimize (if not eliminate) those risks.
Consider the common scenario in which your soon to be ex-spouse wants to retain a house which you jointly own and has an outstanding mortgage loan. It is simply not enough for him/her to pay you money for your share of the equity in the house. If at all possible, the ex-spouse needs to refinance the mortgage loan, so that it is no longer in your name.
If that is not possible—and you do not want to force the sale of the house—at least require that he/she make all mortgage payments on time, notify you each time a payment is made, agree that if he/she does not make any mortgage payment on time, the house will be immediately listed for sale and that you have the option of making all mortgage payments pending the sale and being reimbursed for those payments when the house is sold.
There are just some of the options, which need to be tailored to your unique circumstances. Joint credit card debt and car loans are also common sources of significant post-divorce difficulties.
Salvaggio Law Group LLC devotes its entire practice to New Jersey Divorce and Family Law matters, and takes the time to help their clients create the best mechanisms for minimizing the risk of debt payment issues following divorce.
If you want to talk, please call us at (973) 455-1220 or fill out the Contact Form on our website.