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Getting Financially Fit After Divorce Follow-Up
During our most recent webinar, Getting Financially Fit After a Divorce with Shannon McClay of Financial Gym, many viewers submitted questions that we didn't have time to answer during the event. Below are Shannon's recommendations.
During the webinar above, Getting Financially Fit After a Divorce with Shannon McClay of Financial Gym, many viewers submitted questions that we didn't have time to answer during the event. Below are Shannon's recommendations.
1. Is it best to consolidate debt? What services do you recommend?
It is a best practice to consolidate date, especially when you have high interest debts, like credit cards, where in the process of consolidating, you can lower the total interest rates you are paying. Your credit score and the amount of high-interest debt you have will determine what the best solution is for you.
If you have a credit score over 680 and less than $5,000 of credit card debt...
You may want to consider a 0% balance transfer card where you can transfer your high-interest credit card debt to a 0% card and have a period of 12-18 months of 0% debt.
If you have a credit score of 680 or higher and credit card balances higher than $5,000...
You may want to consider applying for a personal loan where you can lower your total interest paid and your monthly payment on the personal loan is likely to be equivalent to the minimum monthly fees on the credit cards, so from a budget perspective, you will be in a good place.
If your credit score is lower than 680...
You may have a difficult time getting approved for new credit or loans to consolidate, and in this case, you may want to work with your lenders as far as securing lower interest rates or working through payoff plans. We typically recommend that clients work on consolidating their own debts rather than hire an outside company where you may be contractually obligated to pay the service and you may be prohibited from applying for new debts in the future or possibly filing for bankruptcy which may be something you need to consider.
If your credit score is lower than 600 and you are having difficulty paying off the debts...
Bankruptcy may be something you need to consider. There is a negative stigma to filing for bankruptcy; however, we see it as the potential to have a reset in your financial life.
2. What if we were never married, they have all the credit, and I was a stay-at-home parent? How can I get my ex to split the bank account and home we had together?
In this situation, your best bet may be going through the court system, especially if there's a child involved, and you need to pay for housing for the child. Even if you were married, short of a court order, it's difficult to "force" anyone to help financially if they don't want to. While it may cost money to attain an attorney, it may be the best financial solution for you in the long run.
3. My soon-to-be ex declared bankruptcy. Does that mean that I should do that too?
It depends on your personal situation and what your debt obligations look like. If you had joint debts with your ex and those are part of the bankruptcy consideration, then you would not have to do something in addition to his/her process. If you're in a situation where you can't personally manage your debt situation, then bankruptcy might be necessary. You should consult with a bankruptcy attorney about whether this makes sense for you and if/how your ex's bankruptcy process will impact you.