Breaking Up Without Breaking the Bank

By Michelle Singletary
Washington Post Staff Writer
Sunday, February 12, 2006

Last week, we looked at the financial ramifications of beginning a serious relationship. But now, here you are, just knowing you're headed for divorce. There is no communication in your marriage. Compromise is a foreign concept. And the only common goal you and your husband have is finding the nearest exit to the marriage.

At this point, you need a financial exit strategy.

Start collecting as much information as you can by reviewing documents kept in the house. Such papers include statements from your spouse's 401(k) plan, individual retirement accounts, investment statements and bank accounts. Photocopy all the documents and store them in a safe place.

And you know the best place to find out about your family's finances?

Look at your joint tax return. If you can't find a copy of the return, order it from the Internal Revenue Service ( ) using Form 4506 Request for Copy of Tax Return. Mail the form to the IRS address provided and $39 for each tax year requested. Copies are generally available for returns filed in the past six years. You can request a photocopy of the actual return along with schedules and copies of W-2 forms. Or you can get a computer transcript with a line-by-line listing of the return information. The transcript shows most line items contained on the original return, including any accompanying forms and schedules. The transcript can be ordered by completing a Form 4506-T or by calling 800-829-1040 and following the prompts in the recorded message. There is no charge for the transcript; you should receive it in 10 business days from the time the IRS receives your request. Tax-return transcripts are generally available for the current and past three years.

You should also get a copy of your credit report from the three major credit-reporting bureaus, Equifax, Experian and TransUnion. By combing through the credit reports, you may find requests for joint credit cards, loans or large purchases made by your spouse.

If you see mailed statements coming from financial institutions and your name is on them, you have a right to open them.

And if a divorce is imminent -- separate your finances completely!

I'm going to make this short and sweet for you. Here's what you need to consider when your marriage is over:

· Close joint accounts, or request that the creditor convert these accounts to individual accounts. Under the law, a creditor is prohibited from closing a joint account because of a divorce but is permitted to do so if either spouse requests it. However, creditors are not required to change joint accounts to individual accounts. They can require you to reapply for credit as an individual. Based upon the strength, or weakness, of your credit profile, they can either grant or deny credit.

· Don't forget to cancel other consumer credit accounts, such as department-store or gasoline-card accounts. Planning for the possibility of a divorce or death of a spouse means taking a long-term view. It makes sense, if you're married, to have at least one line of credit in your own name. That could provide some assurance, in a situation where all joint accounts or primary/authorized user accounts are suddenly made unavailable, that you would still have control over at least one line of credit.

Given the mutual benefits (or pain) that joint accounts can give both spouses, it's clear that early in a divorce proceeding, the spouses ideally should split up their credit accounts in a way that makes sense. Not doing so leaves the door open for one spouse to abuse the joint credit accounts, resulting in financial problems for the other spouse -- including possible harm to one's credit rating.

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