Divorce and Debts
Popular belief surmises that the division of property and other assets acquired during a marriage is one of the main issues in a divorce settlement. Tabloids often detail the splitting up of lavish real estate, expensive cars, jewellery, art and other investments. The reality for most people is quite different: for many the real burden of divorce comes when dealing with the crippling debt left behind.
Separation and divorce can destroy credit-laden lives. People may enter marriages already burdened down with mortgages, credit lines, loans and other forms of debt. Invariably, one is left paying off this debt way into adulthood, often carrying it into a marriage as well. Credit card debt in divorce – with reference mainly to joint credit cards – is also seen by the creditors as the joint responsibility of the couple. The credit card company may seek payment from both the parties irrespective of who has been spending. Remember, creditors are in no way obligated to respect the terms of any divorce judgment so there is no hiding from an ex-spouses’ default payments.
In many cases, the strain of operating under debt has actually contributed to the eventual breakdown of a marriage. But, this doesn't mean that debt always equals divorce. Many couples live very happy lives building up and paying off heavy debt loads. They acquire homes, multiple cars, vacation properties all thanks to repeat mortgages, credit lines, and other forms of debt. If a separation eventually happens, the couple then struggles to deal with the repayment of all of this money.
The average cost of a divorce in the US varies from $10,000 to $20,000 in legal fees, thus adding to the existing debt. Divorce also leads to a change in living arrangements and a drop in income. Child support and alimony only add to the financial pressure. The ability of parents to pay off their debts after a divorce influences the amount of cash available for their children as well. Debt can also be so overwhelming that it triggers a bankruptcy for one or both spouses. Debt management before, during, and after a divorce can, therefore have long lasting consequences.
Debt is a part of marriage and a part of divorce, but it's also a part of starting over. As the couple move on to their new lives, the way in which they managed debt from divorce will have a direct impact on a number of matters. It can be very difficult to start over if your credit rating has been destroyed or undermined by left over divorce debts. Obtaining a credit card or renting an apartment can become unbelievably difficult. It may not be easy to open a new account with a bank or any financial institution and creditors may consider you high risk and charge an inflated rate of interest. Debt can seriously hold you back from your new life!
At , we can assist you in starting this new life on a stronger financial footing. Our specially trained counsellors and Debt Management Plans (DMP) can help.
