How Can I Protect Myself from Financial Disaster After a Divorce?

The COVID-19 pandemic shook the entire world in 2020. Even a year later we are all still feeling the effects. As the unemployment rate rose to new highs, the stock market dropped health insurance, and the ability to fund savings suffered drastically. It appears that many may not recover for years to come.

All of this makes it more difficult to plan and go through a divorce right now, but for many people, waiting is no longer an option. If you are facing a divorce and you are unsure if you are financially secure enough to survive, there are a few steps you can take to help protect yourself:

• Understand how property is divided
• Immediately protect your credit and finances
• Negotiate for spousal support
• Plan ahead for your financial future

How is property divided in North Carolina?

Divorce and legal separation laws in the US vary by state. Regardless of what state you live in, the first step to financial security is to find out when you stop being liable for debts incurred by your spouse.

In North Carolina, there are three categories of property in a divorce:

• Marital, which includes assets and debts incurred during the marriage;
• Separate, which included assets and debts incurred by individual parties before the marriage; and
• Divisible, which includes all assets and debts incurred between the date of separation and the finalized divorce.

Note that inheritances are usually considered separate property, provided that the assets have been kept separate. If they have been comingled, a court may (though not always) consider them marital property, and thus subject to division.

Marital assets and debts will be divided equitably. Courts may lean toward a 50/50 split when they can, but the law does not require that.

Divisible assets can also be divided equally. It is worth keeping a close eye on these, as they can change during the period before your divorce, leaving you responsible for debts you may not have incurred. For example, if your spouse has repair work done to his car between the time you separate and divorce, and he pays for it with a joint credit card, you could potentially be on the hook for at least part of that debt.

How can I immediately protect my credit and finances?

As a result of either a divorce or separation, credit scores and finances can take a negative hit. Some of the best ways to protect yourself include but are not limited to:

• Requesting a credit report, because they are the easiest way to ensure you don’t miss any joint accounts or accounts where your spouse is the authorized user
• Changing the passwords for all of your accounts, even if they are not joint accounts, in the event that your spouse had access to them
• Purchasing new car insurance policies that aren’t tied to your spouse
• Putting rental or homeowners’ insurance in your name
• Closing all of your joint bank accounts, or keeping one joint account for all bills
• Being upfront with all lenders and companies that expect payments by telling them you are going through a divorce*
• Verifying that any loans or credit card payments can be frozen until the divorce proceedings are finalized
• Paying all loans, credit card, insurance, and utility bills under your name, even if there was mutual agreement your spouse would pay any particular bill

When the division of assets has been agreed upon in writing, you can close accounts by selling off assets, refinancing loans, removing your spouse from the loan, or switching credit card debt to a new card.

*Note: your lenders may not care that you are going through a divorce or struggling to pay your bills. Creditors can, and often do, become quite aggressive when it comes to debt collection. If you are being hounded by creditors, please tell you divorce attorney as soon as possible. We may be able to do something to help.

Should I ask for alimony if I don’t currently need it?

Keeping things in perspective, divorce can be a long, exhausting, and expensive task. If you are unsure of whether you need alimony, talk with a financial planner and bring those records to your attorney.

Couples in the middle of divorce proceedings have the ability to appeal in the courts if one wishes to be granted temporary relief known as pendente lite. If granted, the temporary support could alleviate expenses that you now have to pay on your own, such as a mortgage, medical debt, or even groceries. If the support isn’t granted, there might be the option to petition the courts to have the other spouse financially responsible for part accumulated during the proceeding.

How can I best plan ahead for my financial future?

For those who are already separated or in the process of getting divorced, it is recommended your keep track and document all assets. This includes taking pictures of evidence, obtaining legal documents, and become familiar with joint and individual financial portfolios. Make sure to meet with your CPA or accountant to talk about the potential tax ramifications of your divorce.

Understand that it isn’t uncommon for spouses to utilize temporary separations as a way to collect evidence before officially filing for divorce. In this case, assume your partner is looking at what needs to be done to get ahead if divorce is lurking around the corner. At the very least, you will have a better idea of your current financial situation, and that is an excellent thing to have.

Consider keeping important documents in a safety deposit box and have important mail sent to a PO Box. This eliminates the risk of anyone stealing or destroying vital information.

If you have not yet set up a retirement account, now is the time to do so, and to be as generous as you can with the deposits. It may be a challenge, but when you “pay yourself first,” you not only ensure there will be money for you later, but you also may be able to avoid paying additional taxes.

Finally, make sure to create a budget for yourself that you can stick to in the long term. If you eat out every single night, it may not be realistic to say you will only eat at home from now on. But to say you will only go out to dinner twice a week, or budgeting for a food delivery service that provides enough food for multiple meals, may help you reduce those costs while avoiding expensive meals out.

Divorce or separation can be quite costly, but if you do your research and hire a respectable and skilled lawyer, you can safeguard your children, protect your assets, and secure your future.

Are you worried about financial disasters late in life? Do you believe that getting a divorce will only cause you to struggle financially in your golden years? The Charlotte divorce attorneys at Epperson Law Group understands how challenging the divorce process is. We also know that it takes a lot of planning to protect your finances so there are no surprises or disasters later in life. Call our office at 704-321-0031 or complete the contact form on our website today to schedule an appointment. We maintain offices in Charlotte, Boone, Concord, and Weddington.