Divorce is hard. No kidding, right? It’s for sure one of the most stressful events anyone would ever have to go through. And after all the papers are finally signed and you think the worst is behind you, that’s when the mistakes you made in the process come back to bite you. I’ve seen it happen too many times to clients of mine. Trouble is they became clients AFTER it was too late to avoid the mistakes to begin with. So there’s a couple of common ones I want to warn you about.
Mainly, I want to warn you about homes and mortgages, but one of these mistakes is more generally applicable to other debt as well.
Don’t try to keep a house, for the sake of the kids, that you can’t afford it on just your income.
I understand not wanting to disrupt the kids’ lives any more than necessary, and not uprooting them completely, but if the mortgage payment is significantly more than 25% of your take-home pay, then you’re asking for trouble…especially if you have other debt as well, and are paying support in addition to all your other household expenses. It’s likely that the two of you bought that house by qualifying for the mortgage using both of your incomes. The fact is that a family that used to live under one roof cannot simply live under two without sacrificing lifestyle to some degree. It’s just a house, really, and there other ones out there that will suffice, and still let you save for your kids’ college and your own retirement. Don’t let a stupid house put you in the poorhouse. Divorce is hard enough as it is on your finances.
2.Your mortgage company doesn’t care what the divorce decree says. (Neither do any of your other creditors.)
What I mean by that is, if, for example, your ex is keeping the house and is supposed to pay the mortgage, as specified by the judge, and he/she DOESN’T ‘T pay it, you are still liable for that debt unless you have taken steps to get your name off the mortgage, and they WILL come after you for it. The chances of them just taking your name off of it, because you asked nicely, are slim to none, especially if they approved the loan in the first place using both of your incomes to qualify. And no it doesn’t happen automatically as a result of the divorce decree. Your ex will likely have to refinance, meaning she has to qualify for a new loan, at today’s rates, on just her income alone, which may or may not be a realistic expectation. If that can’t happen, then selling the house is the only other option. And if there is equity in the home that you are owed and is not compensated for with other marital assets, then one of these would have to happen anyway to get you your money.
But either way, DO NOT just let your ex keep living there and think you’re not gonna be on the hook someday for that debt. That’s just a train wreck waiting to happen.
This second mistake also applies to other debts. Any debt that was in both your names is STILL in both your names after the divorce, even if one of you was ordered to pay it. If the other party defaults, they will come after you for it. It’s up to you to chase down the creditors to get your name removed. Don’t procrastinate. Deal with it now before the collectors start calling.
As a Ramsey Solutions Master Financial Coach since 2011, and a Financial Peace coordinator since 2006, I have been “around the barn” a time or two (yeah I’m no spring chicken). I have decades of personal experience (both mistakes and successes) as well as over a decade of experience helping others get their financial act together. Your money problems might seem overwhelming to you. But I’ve seen some crazy stuff over the years and it takes an awful lot to make me gasp. As a result, I can give you what you need: perspective, a plan, and lots of hope.