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Divorce and Credit FAQs
July 25, 2022

Divorce and Credit; The divorce is final. What now? In a survey completed by Reuters, respondents reported that during the divorce, their number one stressor was the divorce itself. Once the divorce was finalized, the number one stressor in their lives was the financial burden. Financial difficulties after divorce can bring feelings of shame and frustration. Knowing the facts about divorce and credit can help you deal with the stress and build a life free from the worry of your finances.

1. How long does it take to fix credit after a divorce?

There is no predetermined time it takes to fix your credit after divorce. The time depends on the level of finances you shared with your spouse, how much debt you have incurred, and how quickly you are able to pay off that debt. Late payments, collections, and Chapter 13 bankruptcies remain on your credit report for up to 7 years. In comparison, a Chapter 7 bankruptcy stays on credit reports for 10 years. Focus on making on-time payments to begin making repairs to your credit score as this is an extremely important factor.

2. Who suffers the most financially after a divorce?

Traditionally, women are the hardest hit financially after a divorce. Almost 20% of women are at or below the poverty line after suffering a divorce. The wage gap is one reason this is true. Historically, women make less money than their male counterparts in the same careers. Accordingly to The U.S. Census Bureau’s Quarterly Workforce Indicators showed during the third quarter of 2020, women in the age range of 35-44 made 30% less than men and the percentage worsens as a woman ages.

Another factor of women suffering more financially after a divorce is the fact that historically, women are more likely to stay home with children in the marriage.

After divorce, women who do work are commonly forced to work fewer hours after a divorce to care for children as well. This creates a need for women to have to rely on public assistance to help make ends meet and are unable to create savings to fall back on in times of trouble.

To make matters worse, over 75% of women do not receive the full amount or any of the child support they are awarded in the divorce proceedings, as a result 30% of women end up losing their homes.

3. Does your age matter at the time of divorce concerning your finances?

Yes. People who divorce over 50 years of age tend to lose over half of their financial wealth. Divorce also halts retirement and other financial goals that were created and worked for during the marriage. One thing you can do to alleviate a divorce after 50 is to let the marital home go to help with expenses. Also, understand your life isn’t over so you can and should create new financial goals with the help of someone who specializes in finances, like a financial advisor. While your friends and family may mean well in offering financial advice, you need to find a professional who specializes in getting divorced people back on their feet and planning for their future alone.

4. After Divorce, what’s happens with the marital home?

Generally, in relation to the marital home, one person stays in the home, traditionally the person who is responsible for the care of the children, and the other person pays their half of the house. Another option is to sell the marital home outright and each spouse receives money from the sale. Sometimes, selling the house isn’t an option due to the couple owing more than the house is worth at the time of the divorce or having to sell the house at a loss. In these cases, there a few options divorcing couples can consider:

5. What options are available as for the marital home concern?

  • Birdnesting; allows a divorced couple to both retain ownership of the marital home. One person stays in the home with the children for a predetermined amount of time and the other lives in an apartment or other housing solution. The people then switch, taking turns living in the house and living in the apartment. This may be considered a permanent solution or a solution until the sale of the home can be figured out.
  • Renting:  Another option to help with a marital home that cannot be sold in an expedited amount of time is renting. This may be renting to a third party or to one of the ex-spouses until such time as the home can be sold once the market improves.
  • Agreeing to a loss: Sometimes, a couple wants the divorce to be over and done with no matter what. Couples may choose to sell the home at a loss, cut their own individual losses, and move on to begin the rest of their lives. When choosing this option, talk to a financial adviser to make sure this is going to be the best financial situation for you or at the very least, not leave you in a worse financial state than you already are.

6. How do I protect my credit after divorce?

It would be nice to think that adults will all be amicable during and after a divorce. Unfortunately, even though 95% of divorces are considered to be uncontested, many divorces are far less friendly than one would like to think. To protect your credit after divorce, consider adding fraud alerts to your accounts and credit reports. If you have had a nasty divorce, fraud alerts will let you know or prevent unauthorized debts from being created in your name.

Article that may interest you: How Can Getting a Divorce Affect Your Credit Score

7.    What is “money silence”?

In a recent survey, 56% of divorced people said they do not talk about financial problems with friends or family. This lack of communication about finances leads to a tremendous amount of stress that permeates every fiber of a person’s being. Money silence potentially comes from an extreme amount of embarrassment, divorce taboo in some cultures, not wanting to burden others and a general hope that the problem will just go away.

Over 44% of people ranked talking about money issues with family and friends more awkward than talking about death, religion, and politics. Money silence harms people in that they end up suffering in silence and enduring all of the stress alone. Also, relationships can be potentially damaged by the lack of communication about the topics affecting you the most.  It is important to find at least one family member or friend you feel comfortable confiding in even if it is to just get things off your chest and to vent your frustrations.

8. What is financial literacy and how can it help me after my divorce?

Financial literacy is the knowledge and understanding of finances and how to use those skills to make important financial decisions. The basic components of financial literacy are spending, earning, saving and investing, protecting, and borrowing. Understanding the basic components of financial literacy can put you back in control of your finances by creating and sticking to a reasonable budget, understanding which credit and lending options are best for your individual situations, and learning how to manage and pay off debt.

9. As for Divorce and Credit Concern, How Can I Improve my Financial Literacy

There are several ways you can gain or improve your financial literacy, and many require no money to do it:

  • Listen to podcasts: Most podcasts are free and there is an abundance of financial podcasts out there that you can utilize to help you gain better insights into issues that can help you build your financial skills.
  • Sign up for newsletter: Most financial institutions and financial experts utilize blogs and newsletters to keep people up-to-date on services they offer. This is a great way to gain useful tips and resources to help you understand all things financial.
  • YouTube videos: If you aren’t a reader and need to see things to understand, you aren’t alone. There are hundreds of thousands of videos on YouTube that explain financial information in great detail, in layman’s terms, in small chunks, and in large frameworks. Just be sure the videos you chose are from people who have experience with financial literacy.
  • Find social media channels: Many financial businesses utilize social media to advertise and offer financial information to people. Many times, these social media channels are curated for a certain audience. You may be able to find a channel that talks specifically about divorced women and finances, divorced retirees and finances, or other groups who have a vested interest in financial advice that pertains just to you.
  • Read books: There are many books dedicated to financial literacy. Find books online or even at your local library if finances are tight. Sound financial literacy is timeless. Many famous financial advisors have written multiple books on different financial subjects that can benefit you.

10. I have debts that went to collection agencies, and it is making me very stressed. What should I know about collections agencies?

Having debts go to collections can be a very stressful situation especially if the collection agencies are not following protocols that they are by law supposed to follow. Collection agencies, per the Fair Debt Collection Practices Act, are to contact you within 5 days before they call to inform you of the amount you owe, the name of the person or business you owe, and steps to take in case you want to dispute the debt. They also are prohibited from calling you outside the hours of 8 am – 9 pm nor can they call you at work. They are not allowed to contact you if they know your debt is being handled by an attorney and they are not allowed to threaten or use profane language.

11. I feel so overwhelmed about my finances and other aspects of being divorced. How can I focus on my finances when I feel this stressed?

It is very common to feel overwhelmed and stressed about finances after a divorce. The most important thing to remember is ignoring the situation will not make it disappear and will actually only make it worse. When you are unaware of your financial situation, you will continue to worry about it at all times. This will affect your sleep, your health, and your relationships. It is important to take care of yourself during this time as well. Commit to eating a healthy diet, getting some form of exercise, and talking to someone who can help you deal with all of the emotions you are experiencing. You do not have to fight the battle alone.

Fixing your credit after divorce can be a troublesome time in your life. You may feel as if there is no hope or that your situation will never get any better. While you will have to adjust your lifestyle for a while, with the right tools and attitude, you can overcome your finances and credit situations that will help you be in charge of that area of your life once again, or for the first time in your life. Find support and take charge. You can do this!

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