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D I V O R C E L AW E X E C U T I V E

B R I E F I N G
Harmful Omissions

"3 Credit Saving Strategies Most Divorce Attorneys Neglect to


Share with their Clients that End Up Costing them Thousands of
Dollars for Years to Come"

UNDERWRITTEN BY:

Phone: 252.557.9265

1 9 0 4 Wr i g h t S t r e e t , S u i t e 2 0 8 , S a c r a m e n t o , C A 9 5 8 2 5
t e l e p h o n e : 2 5 2 . 5 5 7 . 9 2 6 5 • w w w. c r e d i t a n d d i v o r c e . n e t

© 2009 CreditandDivorce.Net
Harmful Omissions
Damaging New Trend in the New Economy

Most people believe that a divorce is the worst thing that can happen to a household. That might
be true before the divorce; however, after the divorce when they see what it did to their credit
rating, they quickly change their mind. If by chance your marriage didn't ruin your credit, there is
a high probability that going through a divorce will.

The fear of damaged credit has caged some couples into staying married when they otherwise
would have filed for divorce sooner. According to
leading Southern California divorce attorney Jeffrey
Lalloway "the fear of credit and what the other per-
son would do to their credit should not keep either a
man or a woman in an unhealthy or abusive situa-
tion." This fear of spousal credit abuse isn't unwar-
ranted either. Cultural trend writer Katherine McKee
published her research findings that found that
"women's credit takes a bigger hit than a man's
when a couple splits up."

According to an article published by smartmoney.com, "the marriage may be over and the di-
vorce papers long signed, but one strong bond remains: the credit they [husband and wife] once
took on together." A divorce decree doesn't change the contracts you made together as spouses to
pay your bills. A court cannot overturn contracts between individuals unless they are fraudulent
or not lawful and a divorce does not fit either of these definitions. Therefore, the contract re-
mains intact until the contract ends (when the debt is paid off). Liz Pulliam Weston, credit expert,
points out that a divorce decree is typically binding only on the parties that agree to it - and
creditors don't agree to it.

And this is where the problem lies. Many divorce attorneys tell, and have told their clients, that
their creditors will accept the divorce decree and relieve them of their ex's debt. As you've just
read, this simply isn't the case. It's not that simple. Neither is the process of dividing property and
debts in a divorce. When you are getting divorced you're also divorcing yourselves from any
emotional attachment you might have to your assets as well. This is easier said than done.

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In a divorce, worrying about your credit score may be the last thing on your mind. Divorced
couples may find their credit suffering for the simple reason that too many divorce attorneys fail
to look out for their clients' interests in that they don't help them separate financially from their
former spouses. Instead, too many divorce decrees simply state which party will be responsible
for paying which bills. Doing this leaves both parties open to all sorts of future financial disasters
and complications.

Preemptive Solution

In an ideal world, divorce attorneys would alert their clients to these dangers and help them pro-
tect themselves. Amy Boohaker, financial counselor to divorce attorneys, says "not many divorce
attorneys sit down with their clients and talk about how they're going to handle joint debts. They
let [the clients] go off and solve that on their own." While other attorneys counsel with their cli-
ents to separate every joint account, you can't simply tell your clients to tell their creditors that
they're getting divorced. A creditor cannot close a joint account because of a change in marital
status. However, it should be noted that a creditor could close a joint account at the request of
either spouse.

What most couples and attorneys fail to recognize is that an account is not really closed out until
the balance is paid off. What's even worse is that it's very easy to re-open accounts if the ac-
counts are being paid on time. According to creditinfocenter.com, credit card companies are en-
couraging current closed accounts with balances to be re-opened if the payment history has been
positive. Just like it only takes one spouse to close a joint account, it likewise only takes one
spouse to re-open a closed account again. Borrowers beware!

In the case of Joan, a Los Angeles homemaker, what she didn't know hurt her. "I just assumed
my responsibility ended once the divorce was final." For too many this is the general assumption.

Understanding the different kinds of credit accounts


opened during a marriage may be helpful in eliminating
some of the more common problems that arise in a divorce.

The most common place to find this info is at the Federal


Trade Commission's website...

http://www.ftc.gov/bcp/conline/pubs/credit/divorce.shtm

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It is important to know how a creditor is reporting an account because a creditor who reports the
credit history of a joint account to the credit bureaus must report it in both spouse’s name per the
Equal Credit Opportunity Act (ECOA). This information can be deadly in the heat of a nasty di-
vorce when a vindictive spouse who doesn't care about their credit decides to destroy the credit
history of their soon-to-be-ex-spouse's jointly-held accounts. The most common way to do this is
to run up credit cards and not pay on them.

Find out early if you’re an "authorized user" or not per the FTC site. If this is the case, you can
request to have your name removed from the account because you’re not the one legally respon-
sible for the debt. This is one of the quickest ways to protect your credit during a divorce. Oh,
and ignore that stuff about "community property" accounts being reported on each other's credit
reports. That's just plain false. Liability and reportabilty are two different things. Yes, even the
government gets it wrong sometimes.

Your credit rating is the key to your financial health. Poor credit scores can increase your car and
home insurance rates to almost unbearable levels. Take for instance what happened to Christina
Rowe after her divorce. She described in her book, Seven Secrets To A Successful Divorce-What
Every Woman Needs To Know, just how bad it can be...

"...I got socked with a $4,000 car insurance bill because


my credit score had tanked, yet I had never been late on
an insurance payment. When I wrote them explaining
how my difficult divorce had lowered my credit rating,
they reduced my premium".

Again, most people think that "closing out" joint credit


card accounts is the end of the headache. If that’s all you
have jointly, then it might be, but far too many have
more than just joint credit cards with their spouses. Another thing you need to do is opt out from
receiving pre-screened offers for credit or insurance (yes, you can reduce all that junk mail being
sent to you every day and possibly save a few trees as well). The last thing you would want to
have happen is for a spiteful ex-wife or ex-husband to be tempted to apply for a loan in your
name just to ruin your credit. There are two ways to do this...

1.) On-line at www.optoutprescreen.com or

2.) By phone 1-888-567-8688

In extremely emotional cases it would be wise for you to put a fraud alert on your credit file.
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This makes it impossible for anyone to take out new debt in your name. The creditor is required
to contact your client by phone to establish any new credit.

In most cases there are joint accounts that need to be paid during and after the divorce. The more
common accounts include cars, homes and credit cards. Some practical solutions are...

Joint Credit Cards-Acquire new credit cards and transfer any remaining balances. You do this so
that the debt is separated and you and your spouse are responsible for the repayment of that debt.
If the credit history of your or your spouse doesn't permit to acquire new cards, find a co-signer
or sell joint assets to pay off existing debts.

Car and Homes Loans-Have the loan refinanced into your or your spouse’s name. You want the
one responsible for the debt to have their name reported only. You can also use the refinance of
an asset to buy out your spouse if there is equity in it. However, do not under any circumstance
take your name off the title of the asset in question. If you remove your name off of title (using a
quit claim deed), you are removing yourself of ownership but not of loan responsibility or liabil-
ity. This is a very dangerous situation to be in. This also means that you will not be able to split
the equity in the asset at time of sell because you would have relinquished your shares of owner-
ship to your spouse while retaining all the liability.

There is one other way to remove your name from the credit documents so that you're no longer
responsible for the debt. This way, however, is fairly uncommon and is tricky to negotiate. It's a
process called "Name Delete Assumption." This process simply deletes your name from the loan
if your spouse is able to currently qualify for payments of the debt.

Until a settlement is reached, have all your payments and soon to be ex-spouse's payments de-
ducted automatically from your respective checking accounts.
Even after settlement has been reached this is a good tactic to
use to protect your credit until all debts have been safely
separated. It would be good practice to include this in the di-
vorce decree as well.

With so many people getting divorced without preparing their


finances beforehand, it may be hard to set aside emotions
long enough to get everything in order. However, not doing so
can result in serious issues with your credit score. If a divorce
is looming for you, the best thing to remember is that preven-
tion is the best medicine.

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Where there's no money there's no honey. Divorce has long been
connected to bankruptcy, and bankruptcy to divorce. An article by
staff of the Executive Office for United States Trustees states:
"One theory was that divorces cause bankruptcy because the dis-
solution of the household produces financial distress. The second
theory was that divorce and bankruptcy are both examples of
breaking promises and that an increase in promise breaking
'across the board' has produced the increases in both divorces and bankruptcy filings."

In addition to a divorce reducing the ability to pay, the correlation between divorce and bank-
ruptcy may reflect the fact that divorce lawyers often counsel their clients to file for bankruptcy.
If this is the case of the opposing counsel, it's not only important, but also essential for you to
protect your credit from the backlash of bankruptcy.

Especially tragic are situations where the ex-spouse files bankruptcy and includes many joint
debts in the bankruptcy. The spouse not filing bankruptcy is left holding the bag for these joint
debts. Not only is the spouse who didn't file bankruptcy responsible for the unpaid debts (debts
which can legally be sued for), but the non-filing bankruptcy spouse's credit is also ruined. The
tragic part about this is that it is something that cannot be corrected, because the credit bureaus
have the right to report you as being delinquent under the Fair Credit Reporting Act (FCRA) be-
cause you were the original owner of the debt.

Also alarming is that the percentage of women filing bankruptcy petitions has almost tripled dur-
ing the last 20 years. Is this related to divorce? It certainly has to be counted as one of the factors,
but not the only factor because the divorce rate hasn't increased nearly so dramatically. In a re-
cent study, researchers found that when divorce occurs, household heads' probability of bank-
ruptcy is predicted to rise by 86% in the following year. Thus divorce has a large effect on bank-
ruptcy. This is yet another reason for you to protect your credit when going through a divorce.

Summary

Clearly divorce is a destructive threat to your credit. It is our opinion in this credit driven world
that the far-reaching and long lasting effects of damaged credit will only get worse. Divorce at-
torney’s reputations now will hang in the balance as to how they helped address this new threat
with their clients. You now have been briefly exposed to the subject of credit and what steps you
can take to protect your best interest.

Knowing how to protect your credit allows for you to preserve your financial future.

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So, in case you missed the 3 overlooked credit saving strategies that most divorce attorneys mis-
handle when dealing with a divorce, here they are again...

1.) Review your credit reports to know what's being reported and how you can then take the nec-
essary steps to protect yourself.

2.) Opt out from mail solicitations to protect against identity theft and fraud and to contact the
credit bureaus to place a fraud guard on your credit file.

3.) Have all bills automatically deducted from both parties' checking accounts to decrease the
likelihood that either spouse’s credit will be hurt during the divorce by non-payment.

Clearly there is a lot more that can be done to preserve your credit when going through a divorce.
This FREE report is just the beginning of what we offer in the way of protection for you to safely
pass from married life to singlehood.

Your Next Step

If you’re ready to begin protecting more than just your credit then you’re ready for our Credit
and Divorce Planning Workbook. You may invest in your future at www.creditanddivorce.net.

This workbook will walk you through, step by step, all the ways you can preserve and protect
your Budget, Retirement, Individual Credit, Dependents, eliminate Gaps in Life Skills and Es-
tate. This work book is your BRIDGE to help you cross over from married life back to single-
hood.

We have compiled years of research and client cases to find the most common reoccurring
themes. We have unloaded and unlocked some of our closest held secrets when it comes to di-
vorce planning. This workbook contains our behind the doors process that we take every single
one of our clients through. Clients which have paid as much as $3,500 for their divorce plan.

With the current wave of economic events we are seeing a rise in divorces and bankruptcies.
What is even more alarming is the lack of knowledge in the market place. Simple precautionary
steps like opening up a PO Box for new credit card offers or bank statements are almost unheard
of.

Warning

We’re not able to reach everyone on a one on one basis, which is why as a company we decided
to reveal our divorce planning secrets to those who otherwise would have never had them in the
first place. Credit and Divorce was created to help disadvantaged parents to protect their stan-
dard of living while raising their children after their divorce. It was meant ultimately to protect
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their children. We know that there will be some spouses who use this information to sabotage
the person they’re divorcing. Do not underestimate the information contained in the workbook
and worksheets. They will give whoever has them in their possession the upper hand, not only
financially, but situationally as well.

It was never our intention for our work and philosophies to be used to entrap or disenfranchise
anyone. However, by not knowing what we offer in our workbook, you run the risk of being
manipulated or a victim of subterfuge by a disingenuous spouse. For this, we caution all to in-
vest in a copy of the workbook for themselves if for nothing more than as insurance. You will be
able to recognize some of the tactics if used against you.

Again, you can insure your financial well being at www.creditanddivorce.net.

About the Author

Ryan Nickel is a Certified Family Financial Counselor and Di-


vorce Planning Specialist. His Credit and Divorce Planning
Practice is based out of Sacramento, CA. He has been featured
in many publications, on television and as an invited guest on
several radio stations. You can contact Ryan S. Nickel at (252)
557-9265 or email him at ryan@creditanddivorce.net.

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