However, even the most cautious of borrowers can find themselves in difficulty through the trauma caused by separation and divorce.

There are ways you can deal with the financial implications of a break-up of a marriage that will lessen the trauma of divorce or separation. This article is intended to help couples back on the right track. Here are a few hints and tips:

Rebuild your credit history

1. Looking closely at issues involving credit.

Understanding the different kinds of credit accounts opened during a marriage or relationship may help you to understand the potential benefits and pitfalls of each.

Whether you are married or single, you alone are responsible for paying off the debt; a joint account debt is the responsibility wholly of each of you, under a legal term known as ‘joint and several responsibility’ which makes each of you responsible for the full amount of the debt.

No matter who handles the household bills, you and your spouse are responsible for seeing that those debts are paid. A creditor who reports the credit history of a joint account to credit bureaux must report it in both names. Because two people applied together for the credit, each is responsible for the debt. This is true even if a divorce decree assigns separate debt obligations to each spouse. Former spouses who run up bills and don’t pay them can damage their ex-partner’s credit histories on jointly held accounts. If you’re considering divorce or separation, pay special attention to the status of your credit accounts. If you maintain joint accounts during this time, it’s important to make regular payments so your credit record won’t suffer. As long as there’s an outstanding balance on a joint account, you and your spouse are responsible for it.

2. The account will appear on your credit report, and may appear on the credit report of any “authorised” user – important particularly regarding credit cards. If you are not employed outside the home, work part-time, or have a low-paid job, it may be difficult to demonstrate a strong financial picture without your previous spouse’s income, and we have seen many instances where debts which were affordable with 2 incomes are no longer sustainable on only one income.

By opening an account in your sole name, no one can negatively affect your credit record.

3. If you divorce, you may want to close joint accounts or accounts in which your former spouse was an authorised user. Alternatively ask the creditor to convert these accounts to individual accounts.
A creditor cannot close a joint account because of a change in marital status, but can do so at the request of either spouse. Further, bear in mind that if there is a debt outstanding and the creditor is aware of conflict between the account holders, the creditor would be entitled to ‘freeze’ the account (stop all activity on it)in order to stop the debt rising and demand immediate repayment.

A creditor, however, does not have to change joint accounts to individual accounts. The creditor can require you to reapply for credit on an individual basis and then, based on your new application, extend or deny you credit.

In the case of a mortgage or home equity loan, a lender is likely to require refinancing to remove a spouse from the obligation.

For couples thinking of divorce our debt solutions advice team can discuss official ways of helping you become debt free such as Debt Management Plan (DMP) an Individual Voluntary Arrangement (IVA) or Bankruptcy.

Some of the advice team workers have actually come through the stresses and strains of relationship breakdown and divorce, so can really empathize with clients on all topic relating to money problems.
The advice team workers can provide advice for people who are divorcing or planning to divorce, but also for individuals who have already divorced on credit repair.

Amongst all the emotion surrounding this life changing period, it is key to find the time to plan and consider options with regard to money problems – call us now on 08450 505096 and we’ll take you through the solutions available.

R3’s president Steven Law commented: “Going to this source for financial resolution will simply build up a larger store of debt and create more pressure and stress. We must highlight the importance of obtaining professional advice over panic measures that will worsen the problem.”

“Post-recession we stand on the brink of a personal insolvency crisis that will take years to work through the system as this finding indicates.”

The survey also reveals that almost one in four individuals struggling with their debts (23%) say they are avoiding contact with people they owe money to, while 30% have not spoken to their family or partner about their financial problems.

“Clearly traditional fears of what others may think or the fear of bankruptcy is still putting people off seeking a solution to their problems. Unfortunately, avoiding the problem or going to the wrong source is likely to only increase the eventual likelihood of bankruptcy,” concluded Steven.” – Business Money News

If you are suffering with money worries burying your head in the sand does not work, the people you owe money too will continue to pursue you for repayment unless you deal with them head on – for assistance in dealing with the people you owe money to and to help alleviate your money worries contact us today on 08448 247 269

The Institute of Economic Affairs’ (IEA) study warns the actual debt is six times higher than official estimates.

It claimed the Treasury has racked up liabilities of £4.8 trillion – or 333% of Britain’s national income – because of the spiralling costs of state pensions.

The astonishing figure is far higher than the official Government debt tally of £772bn – itself a sum unprecedented in British history. The report suggests Britain’s ‘real’ national debt therefore has an even higher share of national income than that of crippled countries such as Zimbabwe.

The emergency budget

This debt will decimate the UK’s public spending for the next decade, Deputy Prime Minister Nick Clegg will warn today. This could be a signal next week’s emergency budget cuts could be bigger than the £6bn already planned.

The Government’s new Office of Budget Responsibility is preparing to release its first assessment of the UK’s spiralling national debt.

Extract taken from: This is Money

A self-employed financial adviser in the East of Scotland whose marriage broke down found himself faced with a reduced income and homelessness. He sleeps in his office or occasionally stays with friends, is on a low income and has no capital or investments. The matrimonial home, which was in joint names, was sold and the proceeds were paid into a building society account in his wife’s name only. His wife used some of the money to buy property for herself and is now consulting a solicitor about a divorce.
The story was disclosed by Citizens Advice Scotland this week when it launched a new edition of its guide to separation and divorce in Scotland, Splitting Up, by David Nichols. In the first half of a two-part special on separation and divorce to coincide with its publication, Money World looks at the kinds of financial problems this painful process can precipitate. Next week we report on some of the solutions, which may help to reduce the cost of splitting up and in the process may contribute to lessening the bitterness spouses often feel for years afterwards.

Not only do divorcing and separating partners face financial problems, but they may not have enough money to take up their legal rights to tackle those problems. The average cost of family and matrimonial cases in the Sheriff Court in 1997-98 was £1535.77, according to the latest report of the Scottish Legal Aid Board. If the case is heard in the Court of Session the average costs increase to £6764.41. Even an ordinary undefended divorce can run to £700 in legal fees.

Legal aid is means tested and to receive it an applicant must have a disposable income – that is after tax, housing costs and allowances for dependents living with you – of less than £8571. However, if the disposable income is £2625 or more, the applicant must make a contribution to the legal costs and this prevents many people from pursuing their rights.

The solicitor of a man in the North of Scotland divorcing his wife refused to represent him because he could not afford the legal aid contribution. According to a CAB evidence paper, the man ”received a court summons and he is worried about having to leave the matrimonial home”. In a similar case, it adds: ”A Fife CAB reports of a client who has been refused legal aid for his divorce. Consequently, his solicitor has written telling him he will not represent him in court.
The solicitor advised him to give up his employment so that he will qualify for legal aid.”

Meanwhile, a single mother in the Borders is facing an application by her estranged husband for sole care of their 10-year-old child. Her total income including family credit is £145 per week and her legal aid contribution has been assessed at £123.70 a month. She cannot afford this but her solicitor has told her she will not be able to defend the action if she does not pay. ”Separation and divorce are among the most common but also the most traumatic of problems to be brought to bureaux,” says John Crotch, chairman of Citizens Advice Scotland.

”Last year the CAB Service, Scotland’s largest advice service, dealt with nearly 11,000 separation problems alone. ”But our experience is separation and divorce results in many other related problems, such as housing, debt and social security.” The number of divorces has increased by more than 450% in the last 30 years, reaching 12,222 last year. Nearly a third of them affect children: the parents of 6500 children divorced in 1996.

In 1997-98 CAB in Scotland dealt with 60,331 cases involving debt, one in 10 of all the problems coming to it. Many of those people were in debt because of a breakdown in a relationship, missed maintenance payments or ”exorbitant” interest rates. The average debt was £2800 per client.

Many households had multiple debts and in some circumstances partners were not aware of the amount of money owed until the other partner left. For example, the evidence paper highlights ”a North of Scotland CAB report of a client who is a single parent with a five-year-old son. She has multiple debts totalling £13,000 and is on income support of £81.80 per week. The client problems are due to illness, loss of job and split with partner.” Another North of Scotland CAB reported how a woman came to it in a very distressed state after her husband walked out the previous weekend leaving debts including bank and private loans.

The benefits system frequently fails to help. ”In many instances families are being turned down for assistance from the Social Fund despite their obvious need,” the evidence paper states.

A father in the North of Scotland was recently awarded temporary care of his children. He had been in bed-and-breakfast accommodation for more than three years since separating from the children’s mother. So although he was allocated a council flat he had no furniture and no cooker. His social worker helped him to make an application for a community care grant but it was refused. An unemployed single father in the East of Scotland living with his three teenage sons on income support applied for a grant of £1200 to buy a settee to replace one that was mouldy and infested with flies, a washing machine, carpet to replace a dangerously threadbare one and a table for the family to eat at. He was told the grounds were insufficient for either a grant or a budgeting loan. ”It is not just the end of the relationship that is painful but dealing with the resulting consequences and arrangements,” Crotch says. ”Our client evidence shows that although the Government is making reforms to the welfare system, further change is needed.

Source: Herald Scotland