Navigating Finances after Divorce

Going through a divorce can be emotionally — and financially — draining. While you are navigating the emotions involved, you also may be incurring significant expenses. A Martindale-Solo Research study found that the average Texas divorce costs $15,600, including $12,400 in attorneys' fees. And, the average divorce in Texas takes about one year to complete.

For married couples, the good news is that divorce rates generally are on the decline. Texas’ most recent figures from the CDC show the state’s divorce rate at 2.6 per 1,000 population in 2018. But that doesn’t tell the full story. The American Psychological Association estimates that about 40 to 50 percent of US marriages end in divorce.

Debt issues can compound what already can be a long and difficult process. If you anticipate a divorce, or are in the process of one, there are several steps you can take to protect your assets and manage your finances.

Get a Handle on Expenses

If you haven’t already established a household budget, now is the time. You’ll need it to know how to plan for post-divorce expenses, and for equitably dividing assets and debts. If you don’t have a budget already in place, begin tracking every expense — from food, utilities, mortgage, and insurance to child care, medical care, and car expenses.

Organize Your Records

It’s time consuming, yes, but gather copies of your account statements. Ideally, have records for at least one year for bank and investment accounts, loans, credit card statements, income, and tax returns. Request copies of your credit report from all three reporting agencies. While credit reports are for each individual, yours may include some of your spouse’s credit-related activity. Look for any accounts or debts you weren’t aware of.

Rework Account Ownership

Close any accounts that are held jointly, including credit cards. Be sure to note “closed by consumer” when canceling for less impact on your credit score. Then, establish checking, savings, credit, and brokerage accounts in your name only. This not only helps minimize any potential liability should your spouse use your combined accounts before the divorce is final; it also begins establishing your financial independence.

Continue Making On-Time Payments

In Texas, one of nine community property states, both you and your spouse are held liable for repayment of any debt incurred during the marriage. Your divorce decree should spell out how much each of you will pay on outstanding debts. Even though you are divorced, if the debt is jointly held, you can be liable if your spouse misses payments. As with any debt, paying responsibly on time avoids negative impact to your credit report and the prospect of collection action.

Consult the Professionals

It would be wise to discuss your options with your attorney, especially if you suspect your spouse might file for bankruptcy. You could be held responsible for full repayment of debts should your spouse file for bankruptcy following the divorce.

Consider also working with financial advisor¹ and/or a CPA to ensure your assets and taxes² are managed wisely.

Once the divorce is final, be sure to update your beneficiary information on all of your accounts. You also might want to update your emergency contact information with employers, schools, doctor’s offices, and the like.

1 Non-deposit investment products and services are offered through CUSO Financial Services, L.P. ("CFS"), a registered broker-dealer (Member FINRA/SIPC) and SEC Registered Investment Advisor. Products offered through CFS: are not NCUA/NCUSIF or otherwise federally insured, are not guarantees or obligations of the credit union, and may involve investment risk including possible loss of principal. Investment Representatives are registered through CFS. UFCU has contracted with CFS to make non-deposit investment products and services available to credit union Members.

2 CFS does not provide tax or legal advice. For such guidance, please consult a qualified tax and/or legal advisor. Federally Insured by NCUA