There’s no way around it. Divorce can be a financial setback for those who have become dependent on a spouse’s income, especially if children are involved. Things like vacations, private schools for their children, music lessons and expensive sports oftentimes have to be cut or curtailed because the funds are not there anymore. Decreased financial stability is one of the additional realities that couples must face when splitting into two households, but talking with your attorney can help ease the process and set you off on the right path.
A recent survey found that nearly 1 in 10 bankruptcy petitions cite “divorce” as the reason for filing. The vast majority of time, especially because divorce attorneys work hard to secure fair settlements and support payments, divorce isn’t the direct cause of bankruptcy; instead it’s a result of failing to make necessary financial and lifestyle changes after the split. This reality is typically hard for clients to accept, especially in the face of so much loss and change already.
One of the easiest ways to curb your potential for bankruptcy after a divorce is to speak to a financial counselor or bankruptcy attorney before you file for divorce. If a couple has a lot of debt that they cannot service or a house that is underwater and held jointly, it may make sense to consult with a bankruptcy attorney before splitting. It is generally smart to consider the pros and cons of paying the existing debt versus the pros and cons of not paying the existing debt and/or declaring bankruptcy.
In all, it really comes down to two key steps; Communication and Planning.
Talk with your spouse about your assets, debt, and financial situation throughout the entire divorce process, and consult with your divorce attorney about the possibility of spousal support. Also, don’t be afraid to speak with a bankruptcy attorney before the divorce so you can make a plan to reconcile your debts without letting them overwhelm you.
Take the time to plan out a budget during and after your divorce is final. Odds are you’ll have less discretionary income, so plan accordingly. Cut back on some of the more frivolous expenses, and do your best to pay off debts in a reasonable fashion to avoid late fees or interest.
By following these two steps, you’ll put yourself in the best position to be financially independent after a divorce. If you have any questions about either process, feel free to contact us.