What's the best strategy for rebuilding her credit score?
Should I File for Bankruptcy after My Divorce?
by Steve Rhode
Deciding If Bankruptcy Is the Best Option for You
A 401k Loan to Pay Off Debts
Divorced Mom's Finances
I was married for 11 years. My credit was always in good standing and I paid my bills on time.
My now ex-husband and I kept all of our banking and credit card accounts separate because his credit was really bad. Due to helping bail him out of financial disasters over the years and having to use my card when household emergencies happened, my debt kept climbing.
We divorced a year ago due to the financial and other reasons. In the divorce, I kept all my debt. I'm currently around $16,000 in just credit card debt and owe $9,000 on my car. I'm paying minimum payments most of the time and adding a bit more when I can.
After the divorce, I had to move in with my parents because of my credit card debt. My monthly payment to four cards is around $600 a month. I don't want to live with my parents forever, but I can't seem to make a dent in my debt. (I've had a lot of medical bills over the last two years, too.)
I've been contemplating bankruptcy, but can I do this when I'm not even behind on payments? On top of the debt, my name is still on the mortgage loan and deed to the house because the ex has not refinanced yet. He has until the end of April. I doubt with his credit score that he will be able to. He's made several late payments on the mortgage since I moved out a year and a half ago.
My credit score went from the high 700s to the low 600s. I know I can rebuild my credit, but it also takes time. My entire life (I'm 35) I've been very proud of my credit score and because of his actions it's been ruined. Do I just do a bankruptcy and start all over?
I do pay my parents rent to live with them. I have a car payment, car insurance, cell phone bill, and medical bill payments. After everything is paid I have around $400 left. All of my friends tell me I need to get my own place (living with the parents really stresses me out), but how can I unless I live in a cardboard box?
Your advice is appreciated. Thanks!
My quick answer is that following a divorce, bankruptcy should be considered. A divorce is a legal process to break the bond between you and someone else. Bankruptcy is essentially a financial divorce.
The big difference is that in a divorce you remain obligated for all the debts you may have been jointly obligated for from before the marriage dissolution.
Logic says that you will be able to recover your life quicker if you file bankruptcy now and focus on rebuilding your credit. No sense dragging your feet and then eventually filing two years from now when you could have used that time to restart your financial life.
Am I a good candidate for bankruptcy?
There are all sorts of ways to look at this situation. You could cast blame, feel regret and feel anger, but all of that just leaves people paralyzed, not knowing what to do. Ultimately what we need to do is reach a point of acceptance and then take the necessary steps to move forward.
I'm going to give you quite a bit of homework that should help give you clarity. Let's start with the basics.
I'd suggest you first read How to Get Out of Debt. The Honest and Unvarnished Truth and The Truth About The Success Rates, Failure Rates and Completion Rates of Credit Counseling, Debt Settlement, and Bankruptcy. They will give you a great overview of what we need to deal with to get you moving in the right direction. Then use the free How to Get Out of Debt Calculator to review your options.
Steve Rhode is an experienced debt expert who assist consumers for free to find good solutions for bad debt. He sells no products or services, just provides free assistance through his site at GetOutOfDebt.org.
Take the Next Step:
- Get more advice about finances post-divorce by visiting the Dollar Stretcher Library.
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