Category Archives: Divorce Finances

How Is Student Loan Debt Handled During Divorce?

DuPage County debt division attorneyIn 2017, the average student loan debt for graduates was over $37,000, which would amount to more than $45,000 when paid over 10 years with an average interest rate. This is a considerable amount of money. Graduate degrees are even more costly; the average student with a graduate degree has over $84,000 in debt, while the average medical school student has an astounding sum of $246,000 of debt. Many spouses may wonder what happens to this debt during divorce. This is a good question, because these debts can have a profound impact on a person’s life after finalizing the divorce process.

When the Loans Were Taken Out Before Marriage

If a student loan was procured before a couple was married, it will not be classified as marital property. Only marital property is divided during divorce. Non-marital property, such as bank accounts, real estate property, and debt, which was acquired before marriage remains the property and responsibility of that individual spouse. This means that if your wife took out $100,000 in law school loans before you were married, that debt will not become your responsibility after divorce.

Student Debt Acquired During Marriage

Everything changes when student loans are acquired during a marriage. However, simply because the debt is considered marital property does not mean that both spouses will be responsible for the debt. Many factors are taken into account when determining how to divide student debt, such as the following questions:

  • Which spouse profited from the education?

  • Did the non-debtor contribute to paying for the education or provide assistance in other ways, such as taking care of children while the debtor went to school?

  • How were the loans used? For example, did they cover housing as well as class fees?

  • What is the earning capacity of each spouse?

The spouse who went to school may end up being responsible for paying for all of their student loan debt after divorce based on how the above questions are answered. Depending on the circumstances and the decisions made during the divorce process, the other spouse may end up being responsible for paying off the debt as well.

A Wheaton Debt Division Attorney Can Help With Your Divorce

Distributing student loan debt during divorce can be exceedingly complicated. To ensure that your best interests are put at the forefront, you need an experienced DuPage County divorce attorney on your side. Call the Andrew Cores Family Law Group today at 630-871-1002 to schedule a free consultation.

Sources:

https://www.debt.org/students/

https://www.credible.com/blog/statistics/average-grad-school-debt-statistics/

https://www.cnbc.com/2019/05/20/how-much-the-average-student-loan-borrower-owes-when-they-graduate.html

 

The Division of Retirement Accounts in Divorce in Illinois

Marital Property Division LawyerRetirement accounts and pension plans are important issues in Illinois divorce proceedings. In some cases, they are the most valuable asset acquired during a marriage. Even though one spouse may hold the pension, IRA, 401(k), or another retirement fund, this account typically qualifies as marital property.

Marital property is anything acquired during the duration of the marriage, as opposed to non-marital property, which accumulated before the commencement of the union and is not a part of the marital estate. All or part of a retirement account is usually included as marital property and is subject to property division.

Retirement Savings as Marital Assets

Account terminology depends entirely on the type held by the spouse. If the account was an employer-sponsored retirement plan, it likely is a 401(k) or pension plan. Typically, the verbiage used for the division is known as a Qualified Domestic Relations Order, or QDRO (pronounced as “quad row” or “cue drow”). If, however, you or your spouse had an Individual Retirement Account (IRA), a transfer incident to divorce would be the correct terminology.

What is a QDRO?

A Qualified Domestic Relations Order recognizes joint ownership and details the division of the retirement account. A QDRO is required to divide most retirement accounts. QDROs apply to plans that are IRS tax-qualified and covered by the Employee Retirement Income Security Act (ERISA). QDROs are non-applicable to military or government pensions, which are governed by their own set of regulations. In addition to the division of the retirement plan asset, a QDRO may also specify the payment of spousal maintenance and child support to an alternate payee.

Taxes on Retirement Accounts

If a divorcing couple fails to adequately plan for and execute the proper sequence of steps necessary for the division of a retirement plan, they may face high tax assessments to their retirement savings. To avoid wiping out a large part of assets:

  • Do not transfer funds until the finalization of the divorce;
  • Update the beneficiary during the split;
  • Divide the assets into percentages rather than dollar values; and
  • The divorce decree must specifically address the retirement plan’s division.

Ask a Wheaton, IL Divorce Attorney

Whether you are contemplating divorce or are currently in the middle of property division negotiations, it is vital to retain the services of a DuPage County retirement account divorce attorney. The delicate nature of varying retirement plans requires experienced representation to avoid hefty penalties and ensure proper distribution. The attorneys at Andrew Cores Family Law Group understand the importance of the retirement plan and will protect your investment. Call our office today to schedule your free initial consultation at 630-871-1002.

Sources:

https://www.thebalance.com/how-retirement-plan-assets-are-divided-in-a-divorce-1289260

How Divorce Can Impact Your Credit

DuPage County divorce lawyer credit scoreDivorce can cause a great deal of financial upheaval for a family. However, the divorce itself does not have a direct impact on your credit score. The divorce decree does not add or remove points from your existing number, but the financial outcome after the divorce can still play a significant role in what happens to your score. Here is what can go wrong and how to prevent damage to your score:

Responsibility for Joint Debts

Creditors want their money. They do not care if you got a divorce, nor do they care whether a judge proclaimed that one spouse is responsible for the balance on the joint credit card. If your name is on the account as a co-signer, an authorized user, or a joint account holder, you are also financially liable for these debts. The divorce decision does not negate the existing agreement you have with the lender.

Your Credit Score Is on the Line

If you share an account in any way with your ex, old or new, you are also legally responsible for the balance on that account. If the judge gives the responsibility to your ex, and he or she fails to make a payment, the negative marker will end up on your credit score, no matter how far in the past your divorce occurred. Your credit score may also be affected if your ex or someone else with access to a credit card runs up the balance on the account. Negative consequences affect all credit scores associated with an account, yours included.

Preventative Measures

A general rule of thumb is to close any joint accounts before the divorce process begins. Unfortunately, in some situations, a vindictive spouse may sabotage their former partner’s credit score by making large purchases with no intention of paying the balance. Closing accounts or removing a spouse from an account can help avoid this situation.

Other preventative measures you can take include maintaining an amicable relationship with your spouse throughout the divorce and working together with your ex to pay down credit card balances and ultimately close the accounts entirely. You may be able to work with lenders to pay the amount in full or settle for a lower total. You can also communicate with lenders to convert a joint account into an individual account. No matter your decision, it is best to clear up any loose ends as soon as possible, so you can begin rebuilding your credit once your divorce is finalized.

A DuPage County Family Law Attorney Can Help

If you are considering divorce and are worried about how the process will impact your credit score, the Wheaton divorce lawyers at Andrew Cores Family Law Group can answer your questions and address your concerns. Our experienced attorneys will walk you through the divorce process and advise you of how to protect your finances and your credit. Call us today at 630-871-1002 to schedule your free initial consultation.

Sources:

https://www.experian.com/blogs/ask-experian/how-divorce-can-impact-your-credit-scores/

https://creditcards.usnews.com/articles/ways-divorce-affects-your-credit