Divorce is an emotionally and financially complex process that affects around 800,000 Americans each and every year. Sadly, some studies estimate that, for those couples, net worth could be reduced by as much as 77 percent by the time the ink dries on their decree. Is that always the case though? Certainly not. In fact, those that plan and prepare effectively for divorce often fare better than those who do not. The following information can help you financially prepare for divorce.
Start by Taking an Honest Look at Your Debt
You often hear divorce help sites talking about how important it is to account for all of your assets. This is true, of course, but some fail to mention that you must also examine your debt. After all, debt is not going to simply disappear once the divorce is over. Instead, it will be distributed between you and your spouse, much like your assets. Yet, when it comes to debt, there are also some complexities that get in the way. For example, mortgages and other high amounts of debt may not be as easy to “split” because the lender or extender of credit may not be willing or able to remove one of you from the account.
At first glance, this might not appear to be much of an issue, but it can be problematic. For example, if you attempt to obtain a new line of credit (i.e. purchase a car or a condo once the divorce is over), you may have a hard time overcoming the income to debt ratio. Alternatively, if your spouse is considered “responsible” for the debt in the divorce but your name remains on it, your credit could also take a hit if they ever default on payments. This, of course, brings us to our next suggestion.
Pay Down or Refinance Debt (if You Can)
If you have it within your means to pay down debt or refinance it, it might be a good idea to do so now – before you actually file for divorce. If you do opt to refinance, try to do so in a way that assigns each party’s debt under their own name. So, as an example, if you and your spouse have a joint credit card, you could determine how much debt each of you are liable for and then take out a balance transfer on a card that is only in your name. This can protect both you and your spouse, should defaults occur.
Know Your Options if You Cannot Pay Off the Debt
Upon analysis of their financial situation, some couples may realize that their financial situation is shakier than expected. Should you and your spouse face this reality, it is important to understand your options. You could potentially postpone the divorce (as long as everyone is safe and the marriage is not highly contentious) until you are able to pay down some of the debt. Alternatively, you could talk with a financial advisor, or you could file for bankruptcy prior to filing your divorce. Only you can truly determine the best option – just make sure you educate yourself on all of the ones that may be available to you.
Remember to Address Insurance and Retirement
Debt and assets are a big part of the divorce, but to effectively protect your finances, you must also think about the big picture. If you have not done so already, start looking at what your health insurance options are. Can you come to an agreement as to how you will handle insurance for your children? Furthermore, you should look at your retirement accounts and benefits. These are generally divided in divorce, but if you want to keep the account intact, there may be ways to do so. A divorce attorney can help you understand your options on such matters.
Contact Our Joliet Divorce Lawyers
If you are planning on filing for divorce, contact Mevorah Law Offices LLC. Dedicated to your best interests and backed by more than 200 years of combined experience, we can help you understand your options. No matter what the situation, we will seek to protect your financial future in divorce. Call 815-726-9200 and schedule your free initial consultation with our seasoned Joliet divorce lawyers today.