Whether you are just learning the details of your finances or have always been the money manager in your relationship, you need to be aware that the period from the time the divorce process begins until the divorce is finalized is a particularly risky time when it comes to finances. You will need to determine what needs to be done to protect each of your assets while you negotiate your divorce agreement and await your final divorce. You will also want to protect or enhance your credit rating so that you will be able to borrow money in the future for a new house, a car, or other expenses.
One of the first things you will want to consider is closing joint credit accounts, including credit cards, home equity lines of credit, and brokerage margin accounts. If you cannot pay off the balances, you will not be able to close the accounts, but you can freeze them so that further debts are not incurred with them.
While you technically are likely not liable for debts incurred by your spouse after you separate, you will still have to deal with creditors coming to you for payment if your spouse does not pay. Further, delayed payments on your joint accounts will likely be reported to the credit rating agencies, making it harder for you to secure a loan or credit card in the future. It may be suggested that you simply remove your name from an account rather than close it. Be careful though; people who have been removed have still been chased by creditors in nonpayment situations, whether this is legitimate or not.
If you are a financially dependent spouse, you will most often want to open an individual account at the time you close a joint one. If your credit has been based on your spouse’s earnings, you will want to begin establishing credit in your own name. It may be difficult to establish your own credit if you do not yet have income. One way to begin is with a credit card secured with a deposit at your bank. Research your options in this area and make sure you deal with reputable firms. There are a number of unscrupulous companies operating in the credit repair arena. Some institutions offer secured cards that can be converted to credit accounts after some period of time.
Of course, joint checking and savings accounts need to be dealt with if they have any significant funds in them or are backed with a credit line. You can cut off access to such credit as you would with a credit card. And again, you may want to go ahead and open an individual account in your own name. You may transfer up to half of the funds in your joint accounts to your individual account. However, do not leave either account in such a position that checks will bounce and the accounts will incur new fees as you incur new headaches.
Review your financial information to identify bills for things such as utilities that are in your name. If, as a result of moving out, you are no longer using for instance, electricity or telephone—or your spouse’s cell phone is in your name—you will want to modify the payment arrangements. It may be difficult to get your spouse to pay these bills or to reimburse you.
There are more complex protective actions that may be warranted in some situations. A lawyer may also be able to protect the assets of your marriage through an injunction restraining your spouse from transferring or otherwise disposing of any property covered by the restraining order. There may also be property in your spouse’s possession that will not be considered as part of your property distribution. Your attorney might also be able to use an injunction to get that property returned to you prior to the resolution of other issues in your divorce.
Although rarely used, another self-protective step is to file with a court what is known as a lis pendens in the deeds office of any county where you or your spouse or both of you own real property. The lis pendens puts third parties on notice of your claim to have an interest in the real estate against which the lis pendens is docketed. The lis pendens is basically a notice of pending litigation that may affect real property. A properly recorded and served lis pendens clouds the title to the property, preventing an effective sale of the property behind your back.
Finally, you should consider what might happen if you die before your divorce is finalized. You may talk with a family law attorney or an attorney with expertise in estate planning about your options regarding insurance and assets. These professionals can advise you about whether it is possible, and whether it makes sense, to change the beneficiaries on any insurance policies you own. You might also consider changing the way your property is titled. It is most likely that your home is held in what is called joint tenancy. In this situation, if one spouse dies, the property transfers to the other spouse, regardless of what is in the deceased party’s will. Tenancy in common is different. Your interest in property held this way is yours alone. It transfers according to wishes you stated in your will. In most states, an owner of a property held with joint tenancy may modify the ownership to tenancy in common by filing a statement with the deeds office, even without their spouse’s consent. However, just because it is possible does not mean it is advisable.
