Divorce is one of the leading causes of bankruptcy, but there are ways to avoid the financial turmoil.
Divorce and bankruptcy, as Divorce Magazine notes, often seem to go hand in hand. Financial problems are one of the leading causes of divorce and divorce itself can cause such an upheaval in one's finances that many divorcees are left with no option but to declare bankruptcy. While there is no denying that divorce takes a financial toll even in the best of circumstances, there are ways to protect one's credit and stay on a sound financial footing once a marriage comes to an end. Below is a look at some tips for staying afloat moneywise when going through a divorce.
Watch out for joint accounts
As U.S. News & World Report points out, failing to keep track of joint accounts and trusting that an ex-spouse will keep on top of their share of the payments is risky. A good idea is to close any joint accounts as soon as possible. With the mortgage, keep in mind that one may have given up ownership of the house to one's ex-spouse, but that doesn't mean that one isn't still responsible for making mortgage payments. Even if the divorce agreement says that only one party is responsible for making those mortgage payments it is important to ensure that that's what the mortgage itself says. If both spouses' names are still on the mortgage and one spouse misses a payment, then both spouses' credit ratings could suffer.
Trouble splitting assets
Another common problem that can wreak havoc with one's finances is disagreement about selling and splitting assets. For example, if both spouses have a share in the family business then coming to an agreement about what that business is worth and how the proceeds from its sale should be split can present difficulties. Delaying the sale of certain assets can lead to larger bills, especially if those assets, such as a family home, are expensive to maintain.
Thinking about the future
Finally, it is important to prepare early on for how one's financial situation will change after a divorce. Expenses are very different for somebody living alone rather than with a spouse. Housing, food, utilities, and even taxes tend to be higher when they are not split with a spouse. Furthermore, one mistake many people going through a divorce make is thinking they can remain in the family home on their income alone. Maintaining a home is expensive and in many situations it makes more sense to downsize to more affordable accommodations.
Going through a divorce is never easy, but an attorney can at least help clients who are in the midst of a divorce understand what both their short- and long-term options are. An experienced attorney can advocate for the client's best interests and help them reach a settlement that provides the most favorable terms for their life after divorce.