According to surveys administered by Debt Reduction Services, Inc. to individuals going through bankruptcy, divorce is the third most common event that led them to consider filing their bankruptcy. To those who have never been through divorce, this is a surprising statistic. To those who have, they may wonder why it’s not #1 on the list.
Divorce presents several unique financial challenges to the individuals involved:
First, in practical terms, a single household is splitting into two households, requiring two rents/mortgages, two sets of utility bills, and possibly an additional vehicle, all while diminishing the single household’s power to purchase groceries at bulk prices.
Additionally, both parties to the divorce have likely incurred significant attorney fees.
Further financial complications arise if one spouse has been out of the workforce for long periods of time. He or she may struggle to find meaningful work that can lead to self-sufficiency.
More difficulties arise it the couple has been living in one of the “common property” states, since any debt one spouse has incurred the other is equally accountable for (see attorney for individual counsel).
None of these challenges even mentions the emotional toll that divorce takes on those going through it. At times, such emotions can lead to what is known as revenge spending. Either through a desire to “get even” or to “get one’s fair share,” some soon-to-be-ex-spouses go on shopping sprees, putting major purchases on credit (their own or that of their former-significant-other).
Finally, when the divorce is finalized and the ex-spouses have received what is commonly known as the divorce decree, they can mistakenly find comfort and confidence in the decree’s specifications that Spouse A is responsible for such-n-such debts while Spouse B is responsible for paying debts to so-n-so. Unfortunately, the reality of divorce decrees is that they are not binding upon the creditors involved. The court cannot force creditors to remove one ex-spouse’s name from a given account, and it cannot compel either spouse to pay their bills. As a result, if one ex-spouse fails to meet their financial obligations, their creditors will often seek out the other ex-spouse and request that they make the payments. Regrettably, it is not uncommon for one ex-spouse to file for bankruptcy only to have the other file just a few months later.
Debt Reduction Services Solutions
If you or someone you love and care about is going through (or has recently gone through) divorce, here are some resources and steps to consider using:
- Ask any creditor to remove your name from any account not identified by the divorce decree as your responsibility. While not all creditors will comply, many do have established processes to accommodate such requests. You will usually need a certified copy of the divorce decree.
- Closely monitor your credit report at the beginning of the divorce, throughout the divorce, and for years after the divorce. Your ex-spouse likely knows your social security number by heart and can use it to do some terrible, and yes, illegal, things to your finances. Use AnnualCreditReport.com for your free reports.
- Consider adding a credit freeze to your credit reports through the consumer reporting agencies (credit bureaus: Equifax, Experian, TransUnion). There will likely be a small fee to add it to each of the bureaus, but it may be worth it. You will be given a PIN that will be required in order to make your credit report and rating available to ANY outside party.
Take advantage of our free webinars to brush up on or polish off your financial skills and knowledge. Topics include savings, household budgeting, establishing a financial vision, shopping and spending strategies, spending personalities, as well as relationships and money.
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Debt Reduction Services Programs:
- Debt Management and Budget Counseling
- Free webinars
- Student Loan Counseling
- Bankruptcy Certificate Counseling and Education
- Wall Street Journal: Divorce and Money: Six Costly Mistakes
- Dailyworth.com: 5 Myths about Money and Divorce – Debunked
- Forbes: The Big Money Mistake Divorcing Women Make
- Huffington Post: Divorce and Money Blog
- Wife.org: 25 Ways to Divorce without Going Broke
- NOLO: Divorce & Money: How to Make the Best Financial Decisions During Divorce
- Jeffrey A. Landers: DIVORCE: Think Financially, Not Emotionally® – 3 Volumes
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