Divorce is never an easy topic of discussion but if you’re contemplating separating from your spouse, personal finances are a subject you won’t be able to avoid. Before you rush to file with the courts, understand the credit implications of separation and while divorce might mean the end of a marriage, it doesn’t always mean the separation of financial obligations.

Personal Finances
Divorce greatly impacts the personal finances of the individuals involved because it almost always means a reduction in income for one or both parties.

For members of two-income family, each individual must now budget to live off one income while usually separating into two households. Stay-at-home spouses often fare worse as they must find a way to make up for the loss of income from the primary wage-earner.

Alimony or child support can help, but the stay-at-home spouse may no longer be able to remain unemployed and may need to find a job in order to avoid going into debt.

Savings and Assets
Many couples will divide and cash in joint accounts and investments in order to divide assets equally before settling a divorce. Sometimes this means refinancing or selling a home in order to pay out a spouse. This might also mean liquidating retirement accounts or investments funds, which could result in penalty fees if your investments haven’t matured yet.

Loans and Debt
It’s common for the parties involved in a divorce to attempt to pay off as much debt as possible before finalizing a divorce. You’ll need to find an equitable way to handle debts such as mortgages, auto loans and joint credit cards. You may need to refinance your home or car loans to remove one individual’s name. Or, you may decide to sell joint property and use the proceeds to eliminate shared debt.

Joint credit cards can be problematic, and you may need to work with the credit card issuer to have the debt fairly split into individual accounts. Remember, however, that closing joint accounts will impact your available credit – a factor used in calculating your credit score.

Credit Reports and Scores
While spouses retain their own individual credit reports and scores throughout their marriage, joint credit accounts affect both their reports and scores. If all your accounts were joint and neither of you maintained individual accounts, you may decide to start from scratch and apply for new accounts as an individual instead.

When you divorce, how you handle the shared debt accrued during marriage can impact your credit long after the split. Divorce does not release anyone from their debt.

Legal Fees
Lastly, both parties should be mindful of the debt that can arise from divorce. Legal fees and court payments are costly and can put an individual in a financial bind very quickly. If the prospective debt is more than you can handle, you might need to look for supplemental means to pay off your balances or seek out the most cost effective way to settle.

If you can’t come to a settlement on your own, the courts will get involved. But remember, no matter who actually spent the money – him on a new sports car or her on spa weekends – joint debt may impact your credit reports equally and finances are likely to get tighter.

This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.

Published by permission from ConsumerInfo.com, Inc.  © 2013 ConsumerInfo.com, Inc.  All rights reserved.