|Guest Post by Dick Critchlow|
For many divorcing couples the question arises concerning their ability
to borrow money after the division of real and other marital assets.
Even if you live in non-community property state, there are still
questions you may wish to ask concerning your future borrowing power
following your divorce settlement. After all, assets are an important
part of an individual's ability to obtain a loan, so you need to learn
how your divorce settlement in terms of asset assignment will affect
your borrowing power in the future.
It is good idea to talk to your divorce lawyer before you begin the
process of filing for divorce in order to find out the information you
need to know about the affects of the divorce on your assets, especially
how the valuation of those assets during the divorce proceedings can
affect the valuation of your individual assets relative to borrowing
ability. Some of the things that can possibly happen during the process
of property distribution and asset valuation and assignment include the
• The majority of the martial assets will be assigned to the person who
makes the least amount of money. This can substantially affect the value
of your personal assets and thus your net worth.
• The real estate settlement may cause a devaluation of its value and
thus reduce the net worth of both parties in the divorce steps.
• When there is an uneven distribution of the marital debt because of
the differences in income, it can also leave the party with the heaviest
debt load saddled with the burden of being unable to borrow because of a
high debt to income ratio.
• If you live in a community property state the marital assets will be
distributed evenly without regard to who contributed the most money or
made the most payments on an individual purchase.
Since personal assets have a tremendous bearing on each person's ability
to borrow money for any reason, if your divorce settlement causes a
reduction in the value of those assets you are likely to suffer at least
a minor negative effect in your borrowing capacity. On the other hand
this will also depend upon how financially secure the divorce settlement
will leave each party in the divorce. If you have substantial assets
initially, you are probably not going to suffer substantially from a
devaluation of those assets because of your divorce settlement.
The key factor is to plan ahead and acquire enough assets during the
divorce in order to continue living in the same lifestyle you enjoyed
while you were married. For instance, if you wish to retain the family
home, you will need to have enough borrowing power to buy out your
spouse's interest in the house during the divorce settlement. That
doesn't mean you should attempt to hide assets in an effort to prevent
them from becoming part of the marital property at the time of divorce
steps but rather to put forth the effort to acquire enough additional
assets so that when you divorce both you and your spouse will be able to
live comfortably after the valuation and distribution of marital
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