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Avoid These 3 Costly Divorce Mistakes

The stress of a divorce can be overwhelming, but you have to remain level-headed. Otherwise, you run the risk of financial devastation.

Three Common Financial Mistakes That Happen During Divorce

  1. Losing your good credit. A bad credit score can hurt you in countless ways, and it is sadly common after a divorce for a newly-single person’s credit to tank. To make sure this doesn’t happen to you, you will want to get a copy of your credit report before you get your divorce. This will identify all of your joint accounts with your spouse, which you will want to pay off and close before you settle your divorce. Otherwise, you will still be on the line for debts related to those accounts. Consider income tax debt, as well ”“ it is possible for the IRS to audit your last joint tax return, sometimes up to seven years later, so make sure your divorce agreement specifies how to handle tax penalties down the road.
  2. Not paying attention to insurance policies. In many divorces, one party will be required to obtain life insurance to insure things like maintenance (what you’ve probably heard called alimony) and child support payments. If you are the spouse who is the beneficiary of the policy, make sure there are checks in place to periodically make sure the premiums are being paid. If you don’t do this, then you may find in the future that your ex-spouse stopped paying for the policy, which could be a crippling mistake when the time comes that the money is needed.
  3. Not understanding asset liquidity. Liquidity means that you can turn your assets into cash, and in many divorces, one party will end up with a majority of assets in illiquid form. Things like houses are considered illiquid because they are hard to turn into cash quickly. If the marital property you keep after a divorce is in mostly illiquid form, ensure that you are going to have enough liquid assets to pay for costs of living. Otherwise, you may end up in financial trouble.

Contact a Denver Divorce Attorney for Help Today

There are many other financial considerations you will need to be aware of to avoid coming into hardship after your divorce. This is one of the reasons it is critical to discuss your case with your divorce attorney.