Protecting your credit in a divorce
Dear Liz: I'm getting a divorce and my soon-to-be ex-wife has stopped making payments on a car loan that's in my name. I can't afford to make the payments, and now the lender is calling. If the car gets repossessed, will that affect my almost-perfect credit and will I be able to get that off my credit history after the court settles our divorce?
Answer: Sorry to be the bearer of bad news, but your "almost perfect" credit became history as soon as she missed the first payment. If your name is on the loan, you're responsible for making sure the payments get made. If you fail to do so, that fact will be reflected on your credit reports and will result in a significant drop in your credit scores. A repossession will just make matters worse.
Furthermore, it doesn't matter what your ultimate divorce decree says about who's responsible for paying what bill. Creditors typically don't have to pay attention to outside agreements made after you're approved for the loan. So if you want to protect what's left of your credit, you'd better figure out some way to catch up on the back payments and to keep current going forward.
You should make sure any other joint credit obligations are covered too. Well before the divorce is final, you'd be smart to close any joint credit card accounts and refinance any mortgages that list you both as responsible for the debt.
Orderliness saves money at tax time
Dear Liz: As a CPA with 30 years' experience, I'd like to offer a few additional thoughts on the topic of how to pick a tax preparer. It is important to know how a preparer charges because some preparers charge hourly rates while others charge based on a fee schedule that considers what forms are in the return. If you're paying by the hour, your total cost depends on how organized you are as well as on the complexity of activities being reported.
High-maintenance clients -- those who provide information piecemeal and who require multiple meetings, e-mails or phone calls to obtain missing data or discuss the returns -- are adding to their own costs. If someone requires a lot of attention, he or she should expect to pay accordingly. Also, it costs more to switch tax return preparers each year because the preparer will need to obtain data about the past, set up files and get to know the client. It's important to find a good preparer and then be a loyal client.
