May 2019 - How to Prepare for the Financial Impact of Divorce
Divorce can be emotionally draining and impact your life in ways you never imagined. Although the greatest effect is to the family, a divorce can be financially damaging as well. If you and your spouse have made the decision that divorce is your best option, your finances could be affected, as divorce is commonly cited as the leading cause for bankruptcy filing.
A prenuptial agreement can offer financial protection to both spouses in the event of a divorce but if you were married without one, your next best line of defense is knowledge. While it's important to act as partners while married, particularly when it comes to your finances, it's also important for each spouse to educate themselves about finances in the event of a divorce. Spouses should be aware of their investments, debts, family income and any other assets, including how they're titled.
Before going to an arbitrator, mediator, or attorney, you should do your homework. List your marital assets and get appraisals where necessary (art, antiques, etc.). You will want to have a handle on the values of the assets you own. You should also make a list of all of your financial obligations and needs.
If bankruptcy is added on top of a divorce proceeding, life can become even more stressful. Divorce ranks high on the list of reasons individuals file for bankruptcy and with good reason. The distribution of property in a divorce involves more than the family home; it can involve joint investments and any assets considered marital property. This can have a significant impact on each spouse’s financial picture. What’s more, you can find yourself responsible for part of your ex’s debt if the two of you held joint credit accounts or if you co-signed a loan agreement during your marriage.
Divorce can be financially devastating to one or both parties, but it is possible to get through it with your finances intact. Educating yourself and doing your homework can help prepare you to work with your attorney and reduce the financial impact on you and your children.