Divorcing spouses must take steps to protect their finances and credit early on in the divorce process. The impact of not doing so can last for years after the ink on the divorce decree dries. In order to protect assets, income, and credit, the following are steps that everyone going through a divorce must take.
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Start with an Asset/Debt Inventory
It is important to know where all the money is, and how much is there. The asset inventory should include an appraisal of physical assets including homes and businesses, bank accounts, investment accounts, and retirement accounts. Similarly, liabilities must be itemized. These include mortgages, student loans, personal loans, and credit cards.
Open Personal Accounts and Close Joint Accounts
It is a wise idea to open personal bank and credit accounts as soon as possible. Doing so limits the possibility of financial tampering by the other spouse. It is also advisable to close joint credit card accounts at the earliest possible convenience. If it is not possible to close a joint account immediately, it is a good idea to inform the creditor that a divorce is pending and that any future expenses on the account will be attributable to the other signatory on the account. Once that letter is sent, the account should not be used for any reason.
Protect Physical Assets
If the divorce is hostile, it is advisable to secure and protect personal property in a safe location in order to shield it from destruction or theft. Family heirlooms, artworks, jewelry, etc. should be itemized, their value assessed and then stored in either a safe deposit box or a guarded self-storage facility. A divorce attorney in Illinois can provide advice on the most appropriate way to protect these assets.
Put a Flag on Credit Monitoring
The credit bureaus should be notified that a divorce is imminent. This can help ensure that unauthorized accounts won’t be opened. Any accounts that must remain open until the final decree should be closely monitored for purchases so that can be factored into the division of assets/liabilities.
Build a Budget
Divorce means the loss of income from the other spouse. This will have a significant impact on the monthly budget. Building a budget is essential to understanding how much can be spent on housing, insurance, food, clothing, etc. Building this early on and living within the budget can reduce the risk of bankruptcy and make it easier to move forward once the divorce is finalized.