Creditors don’t care about your divorce decree

Due to a language barrier, I was placed on the account a couple of years later, as that was the only way to access the money. Now we are divorced, and the divorce decree lists her as not responsible for that debt. What course of action can I take to get it removed; if any?

A: Here’s the basic truth,: Your divorce decree has nothing to do with your legal obligations to creditors. You signed your name to a piece of paper, and that gives you the legal responsibility for the debt.

You might be thinking, "Hey, that’s not fair. She agreed to pay that debt and that is reflected in our settlement." Unfortunately, your creditors weren’t invited to your settlement. To them, you are both 100 percent obligated to pay back the debt and each of your credit reports will reflect that.

So, let me cut to the chase: You have two choices if you want to get this debt removed, you can negotiate with the bank — or you can get your spouse to pay the debt as agreed. Neither option sounds very good.

However, divorce often leads to cash flow problems. As documented in, "The Fragile Middle Class," written and researched by Teresa A. Sullivan, Elizabeth Warren and Jay Westbrook, one of the three most common reasons people file for bankruptcy in the US is divorce. Divorce creates two rent payments, two utility bills, etc., and in general raises each person’s cost of living because the monthly expenses are not shared anymore.

Your divorce attorney should have asked you how your cash flow, after your settlement, would be finalised.

He should have also informed you that bankruptcy might be an option. If you’re not in touch with an attorney, now’s the time for a consult. You will likely get a few questions answered for free, and if you’re eligible for bankruptcy, it’s better to find out earlier than later.

Q: First to finance: House or car?

A: I am in the process of cleaning up my credit card.

I want to buy a home and a car but am unsure which to do first. I’m a bit confused but want to do what’s best for my situation. I do not need a new car right now, but I will in the coming months as my current car is very high miles. I plan to drive it till it won’t move anymore. I just don’t want to make a new car purchase in panic mode. I will be financing for 24-36 months. No more 60-month terms for me.

However, I’ve been crunching the numbers for mortgages and prefer a 20-year over a 30-year term. I’m just so turned off by debt right now and would rather stay as far away from it as I can rather than take on much more. At least a mortgage will give me an appreciating asset whereas an auto will give me transportation to work to earn money to pay for them both.

A: The five C’s of credit include: character, collateral, capacity, conditions and capital.

Your decision whether to finance the car loan or the mortgage first goes to capacity considerations. Both loans are secure loans, collateralised by the financed asset, so it’s the capacity issue that comes to the forefront in this decision.

Beyond looking at your credit score and credit report, lenders are looking at the income available to service the loan. If you have a $500 car payment, that’s $500 that can’t go towards making the mortgage payment.

Since the mortgage loan is going to be several times larger than the car loan, and for a much longer time period, you want to put getting a good rate on the mortgage loan ahead of getting a good rate on the car loan. Take out the mortgage first.