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Divorce

Q&A: Divorced, and in debt

July 25, 2016 By Liz Weston

Dear Liz: I recently got divorced and found myself in about $50,000 of credit card debt. While I’m struggling to slowly pay off this debt, I do have some money saved in a tax-sheltered annuity as well as a small Roth IRA. Should I use those, take a personal loan or file for bankruptcy?

Answer: A good rule of thumb is to leave retirement money alone for retirement. Early withdrawals can trigger taxes and penalties that eat up one quarter to one half of what you take out. You can always withdraw your contributions tax free from a Roth, but any earnings can trigger taxes and penalties. The biggest cost, though, is the loss of future tax-deferred compounding that can equal 10 times or more of what you take out.

If your credit is good, low-rate balance transfer offers could help you lower the interest rate on your debt so you can pay it off faster. A personal loan from a credit union, your bank or an online lender could work if it offers a low, fixed rate and a repayment term of five years or less.

If you can’t pay this debt off within five years, then you should talk to both a credit counselor (visit the National Foundation for Credit Counseling at www.nfcc.org) and a bankruptcy attorney (referrals from the National Assn. of Consumer Bankruptcy Attorneys at www.nacba.org).

Filed Under: Credit & Debt, Divorce & Money, Q&A Tagged With: debt, Divorce, q&a

Friday’s need-to-know money news

May 27, 2016 By Liz Weston

mortgage2Today’s top story: Why debt-to-income ratio matter when buying a house. Also in the news: Crucial insurance changed to make after divorce, how to manage your finances when you’re separated, and a bill in congress that would remove credit report strikes after four years.

Debt-to-Income Ratio Matters When You’re Buying a House
How to improve your DTI.

5 Crucial Insurance Changes After Divorce
Things to address immediately.

Managing Your Finances When You’re Separated
You may be apart, but your money is still together.

This Bill in Congress Would Remove Credit Report Strikes After Four Years
Significant changes could be ahead.

Filed Under: Liz's Blog Tagged With: couples and money, credit report, debt-to-income ratio, Divorce, Insurance, mortgage, separation

Thursday’s need-to-know money news

February 11, 2016 By Liz Weston

siblingsToday’s top story: How your taxes have changed if you’re recently divorced. Also in the news: What every LGBT taxpayer needs to know, financial goals every GenXer should have, and five tools to get your budget in order.

Here’s How Your Taxes Changed If You Just Got Divorced
It’s a different tax world.

Every LGBT Taxpayer Needs to Read This
Marriage equality hasn’t made filing taxes any easier.

7 Financial Goals Every GenXer Should Have
Welcome to middle age!

5 tools to get your budget in order
And how to stick to it.

Filed Under: Liz's Blog Tagged With: budgets, couples and money, Divorce, financial goals, generation x, LGBT, Taxes, tips

Tuesday’s need-to-know money news

December 29, 2015 By Liz Weston

Household-Budget1Today’s top story: Money tasks to tackle during your winter break. Also in the news: How to save thousands on a divorce, getting in the savings habit, and why your new tech toy could be a security threat.

3 Money Tasks to Tackle on Your Winter Break
Assessing the holiday damage.

Getting Divorced? 5 Ways To Save Thousands
January is the start of divorce season.

Get Into the Savings Habit by Putting Away 50% of Your Extra Income
Even if it’s just the change in your pocket.

Could Your Holiday Gift Be a Security Threat?
Hackers can’t wait to get at your new tech toys.

Filed Under: Liz's Blog Tagged With: Divorce, extra income, hacking, Savings, savings habits, security

Q&A: Divorce and mortgages

December 21, 2015 By Liz Weston

Dear Liz: Our daughter was divorced in 2012 from her husband of 20 years. He still lives in the house they shared and she lives elsewhere. He pays the mortgage. When she asks him to remove her name from the mortgage, he says she is harassing him. What are her legal options and steps to accomplish this?

Answer: The couple’s divorce agreement should have addressed this issue. If he agreed to take sole responsibility for the mortgage, she should consult an attorney about holding him to that agreement.

It’s not as simple as requesting that the lender remove her name from the loan, said Emily Doskow, author of “Nolo’s Essential Guide to Divorce.”

“Every once in a while you’ll come across a mortgage lender that is willing to release one of the parties,” Doskow said. “But that’s very, very rare.”

Typically, getting her off the loan would require him to refinance or sell the home. If for some reason the divorce agreement doesn’t address the debt, your daughter still has considerable leverage if her name is on the deed. If she’s still an owner of the home, she can force a sale, Doskow said.

If she’s not on the deed, her options are limited. She may need to ask a court to intervene, Doskow said.

As long as she’s on the mortgage, her credit and ability to buy another home are tied up with her ex. If he stops making the mortgage payments — because he can’t afford them or out of spite — her credit would be trashed, since they are jointly responsible for the debt.

This is why it’s so important to separate all credit accounts and refinance any loans before a divorce is final. Otherwise, the two exes can be tied together financially, if not for life then at least for the life of a loan.

Filed Under: Divorce & Money, Q&A, Real Estate Tagged With: Divorce, mortgages, q&a

Wednesday’s need-to-know money news

October 28, 2015 By Liz Weston

images (1)Today’s top story: Money milestones to hit while you’re in your 40s. Also in the news: Post-divorce tax deductions, tricks to boost your credit score, and signs you aren’t ready to combine finances with your partner.

Five money milestones to hit while you’re in your 40s
Prepping the road to retirement.

The Tax Deductions You May Qualify for After a Divorce
Maximizing your deductions.

Boost Your Credit Score With This Great Little Trick
Tips to nudge your credit score in the right direction.

5 Signs You Aren’t Ready to Combine Finances with Your Partner
Don’t ignore the warning signs.

Should You Put Your Kids In Debt To Teach Them A Lesson?
Debt as a teaching tool.

Filed Under: Liz's Blog Tagged With: 40s, couples and money, Credit Score, debt, Divorce, kids and money, money and divorce, money milestones, tax deductions, tips

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