How to Split Assets Prior to Finalizing a Divorce

The divorce process obviously involves a lot of discussion about who gets what after a marriage ends, and a lot of those discussions can grow acrimonious and contentious in a hurry, leading to hard feelings and more problems. But one thing that couples should take the time to consider carefully is who will be responsible for which lines of credit they shared jointly during their marriage.

Mortgages, credit cards and even loans may be held in both names, and that fact can seriously complicate things when the divorce process is ongoing. There are many reasons that one spouse may not feel as though they should be required to keep making contributions to a loan held in both people's names, but the simple fact is that the standing of all accounts held in both parties' names will affect their good credit scores negatively if they don't continue to make regular payments into them.

Why regular on-time payments matter
For instance, if a couple has a credit card in both of their names, but only one spouse uses it for the most part, and has subsequently racked up thousands of dollars worth of debt, the other party might not feel that they have any obligation whatsoever to help the spouse from whom they are now separating to pay down that balance. Unfortunately for the latter person, lenders see joint accounts as being the equal responsibility of both people listed on it, and therefore, any non-payments or other credit missteps made will likely take a toll on both people's credit ratings equally.

In such a dispute, or any other type of financial issue, it can be easy for the accountholders to miss a payment or two, whether it's because of difficulties they're having in meeting minimum payment requirements or simply because neither is paying out of principle during a particularly tough divorce. But any missed deadline will take a massive toll on both sides' credit ratings, because this factor alone accounts for 35 percent of one's credit rating, the single largest consideration made when determining a score. Therefore, couples who want to avoid having their credit standings fall considerably should work out a plan to determine who will pay what into each account, and make sure both parties are adhering to it as closely as possible throughout the process.

Similarly, couples may also want to make sure that none of their accounts have more debt on them than is reasonable. Another 30 percent of one's credit rating is how much debt they carry versus their total credit limits. This can be especially tricky for divorcing parties to figure out because they may have accounts in their own name that will alter their allowable maximums to be different from what their spouse might have. However, figuring this out is extremely important to maintaining credit health, because in general, lenders only want to see a borrower using 30 percent of their total limits if they want to get the most out of this aspect of their score. The more they borrow as a percentage of their limits, the lower their rating will be. Doing the math to figure out how much debt needs to be eliminated will help both sides to improve their standings as they head into the next chapter of their lives.

Another potential solution
During this time, it might also be advisable for divorcing couples to seek out balance transfer credit cards that will help them get out from under the debts they might have accrued when they were married. These cards will allow them to divide up their other outstanding balances across a number of cards and consolidate them onto one account, with the added bonus of also giving them several months or more of 0 percent introductory offers, which can also make it easier for them to reduce their debts without facing interest charges.

Of course, during this time of trying to take care of accounts that are jointly held, it is likewise important to ensure that both spouses are also addressing the accounts that are held in their name only. The consequences for not doing so will be the same as they face on jointly-held accounts, but will only add to their potential financial difficulties if they allow these obligations to fall by the wayside. It is therefore of the utmost importance that everyone take all the time they can to make sure every bill in their name is paid on time and in full.

Couples should also take the time to individually check their credit reports, which will help them to identify any potentially unfair markings that may be having a negative effect on their personal standings. If any are discovered, it might be a good idea to contact a credit repair law firm, which may be able to help them correct the issues.