How to Avoid Going Bankrupt During your Divorce

Going through a divorce is arguably one of the most difficult and stressful times of your entire life, regardless of whether it is amicable or not. It is still a life-changing event that can leave you feeling sad, lost, anger, bitter, and quite often a failure.

All of these emotions are completely natural, of course. You are mourning the loss of a significant stage in your life and you need time to heal.

Therefore, the last thing you need is additional stress and worry with regard to your finances.

Sadly though, most divorces lead to a financial fallout of some sort with women, on average, being financially affected worse than men.

In fact:

“Women experience a 20% decline in their income after divorce.”

Women are three times more likely to live in poverty than men after their marriage has ended.”

Even more depressingly, the over 50s appear to be hit the hardest by divorce with “most people of this age group seeing their wealth drop by 50% after divorce.”

Surely, there must be steps that you can take when going through a divorce to ensure that you come out the other end with your finances still intact?

Thankfully, there are. Keep reading to discover ways in which you can avoid bankruptcy whilst going through your divorce (and it doesn’t involve fleecing your former spouse!)

Get legal representation

The very first step you need to take is to meet with a team of family lawyers to get some much-needed professional advice. It is a very good idea to educate yourself on the laws concerning dividing assets, property and any debt you may share with your spouse, and a good lawyer can help you do this.

It is important that you choose a family lawyer who is a good fit for you and who understands your needs as a client. If it doesn’t feel right, keep looking.

Speak to your accountant

Your accountant will have you (and moreover your money’s) best interests at heart, meaning they will be able to offer you invaluable help.

Your accountant or financial planner should be able to tell you about all the relevant documents and information you will need to have handy for your divorce, as well as being able to advise you on taxes.

Investigate your financial picture thoroughly

It is incredibly common for one spouse to be in the dark about their financial situation, with often only one person taking control of the finances over the course of the marriage.

If you were the spouse who didn’t look after the money and assets within the marriage, thEn you are at a distinct disadvantage, so you need to do some digging.

Try and locate as much information as possible, including the below documents:

  • Tax returns
  • Payslips
  • Details of bank accounts, savings, investments, etc.
  • Details of all debts including mortgages
  • Any written wills or life insurance plans
  • Monthly expenditure
  • Employment contracts
  • Pension statements
  • Health insurance statements

Know the value of your marital home

Although your lawyer can help you with this, it is beneficial to know how much your home is worth, as well as what is owed on the mortgage.

You also need to work out whether you can afford to keep the home or whether it will need to be sold and divided. Sometimes it is better to sell and start afresh. Buying somewhere smaller and more affordable is preferable than staying in a home that you cannot afford and will struggle to pay the mortgage on alone.

Budget for how you will survive after a divorce

You may not be able to rely on alimony, so it is vitally important that you work out how much you need to earn to live, post-divorce, and then identify ways in which you can earn this money.

Within your budget you should include any child support you will receive, plus alimony, and then subtract all your outgoings such as housing costs, utility bills, etc.

Repair your credit rating

Credit fraud is very common during divorce, so you need to run regular credit score checks on yourself, and your spouse, to ensure that there are no errors or signs of fraudulent behavior.

You also need to work hard at clearing up your own credit score, as not only will you have attorney fees to pay, but you will now be responsible for all your own bills and debts on your own, so you want your credit rating to be as high as possible.

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