Can Couples Afford To Divorce In Tough Economic Times?
By Lori A. Grover, NCPM
‘Til Death (or bankruptcy) Do Us Part
For people wanting to divorce during such difficult economic times the end of their intimate, loving relationship as a couple often seems to be the least of their worries compared to the financial obstacles they face. While it’s always been the norm to sever financial ties by splitting assets and debts and going on to live separately afterward, many couples these days are faced with a number of barriers that prevent them from “financially divorcing” as we know it… And like they wished they could .
Undervalued and over mortgaged homes, high amounts of marital consumer debt, tapped out lines of credit and high un- and under-employment are presenting unhappy couples with a major financial dilemma: “How can we do this if we can’t afford to live independently of each other?”
As a divorce mediator I’m seeing a dramatic increase in the number of couples who simply can’t afford to divorce and live apart because of their own financial circumstances and larger economic factors beyond their control. While this would seem to result in a decrease in the number of divorces, that isn’t the case. What it means is divorcing couples are having to sacrifice and compromise more than ever before – how it plays out is they have to bite the bullet and accept some creative, jointly managed ways of both minimizing their losses and paying down their debt before they can sever financial ties for good.
And unfortunately, sometimes even that isn’t enough, because the income just isn’t there on both sides.
The liquidate everything and file for bankruptcy route just isn’t an option for everyone. Some people’s jobs or even their careers depend on maintaining good credit and there are many who just don’t qualify for bankruptcy – and destroying your credit score in the process is a bad way to end a marriage and start over. Regardless of the reasons, some couples – even though their marriage is over – find that they still may have to depend on each other financially long into the future.
Instances like these have presented me, as their divorce mediator, with the task of directing these couples to the best sources for assistance and helpful information so they can mediate their divorce settlement successfully. If it’s income tax, property tax or real estate related especially, I make sure their options make sense for both parties; are crystal clear and that their interim agreements on the various issues will provide an eventual path to a complete separation, even if isn’t in the immediate future.
No matter how complex or impossible their situation may seem there’s always a solution and having access to the right information, and even more importantly – understanding why they should use it – can make all the difference in how their divorce settlement plays out in the end. In an economy as fragile and unpredictable as ours is here in the U.S., it’s more important than ever for divorcing couples to make their decisions based on facts, not emotion, and to have a solid, sensible plan.
Coming to terms with the end of a marriage is difficult enough without the added stress of not knowing what your financial future is going to look like. The slightest oversight or misstep can create big problems in economic times that leave little, if any, room for error. It’s why I believe divorcing couples should make financial fact finding their first priority – before they begin taking steps that might make their post-divorce financial problems worse.
Going online to get your free annual credit report is a step I always recommend divorcing couples take before they file for divorce, and the few dollars the credit bureaus charge for your actual credit score while they’re doing this is money well spent.
If You Fail To Plan, You’re Planning To Fail
Having also worked with a great number of divorcing couples in a consumer finance career of almost fourteen years in addition to my own divorce experience and my professional experience as a mediator, I’m blessed with a working knowledge of the other side – the banking, finance and credit management side – of the financial conundrum many divorcing couples are now facing. I understand how their circumstances look to their creditors and the finance industry – and how to steer them away from the rocks.
This experience enables me to work a little differently, and confidently, with these couples to help them devise creative, outside-the-box solutions. I consider it a part of my job as their divorce mediator and of the service we provide. We all realize there’s no substitute for a lot more money coming in the door every month. And no, it’s just not possible to solve every financial jackpot a divorcing couple might find themselves in, but I can help them make the most sensible, effective decisions with what they have to work with.
Solutions exist if you know where to look. After digging out of a financial mess following my own divorce, I came to realize the tremendous benefit of actually planning for your divorce.
If I had known then what I know now, I could have saved myself eight years of stress and thousands of dollars in interest paying down debt that wasn’t handled properly. I also wouldn’t have been forced into a refinance of my home at an interest rate that was 3 interest points higher than it should have been.
We plan our weddings far in advance, sometimes years. And even though the bitterness and frustration may simmer for a long time, the decision to divorce is often made in the heat of the moment, without much forethought which almost always leads to unpredictable, undesirable results. Ask your friends, relatives and co-workers how much thought and planning they put into their divorce… And look at their results. Having your financial ducks in a row isn’t just some arbitrary or unnecessary task designed to make your divorce take longer – and be more frustrating. In a weak, depressed economy with high unemployment it’s essential.
Every divorcing couple I’ve ever known or worked with has expressed the same fear and uncertainty about their financial future, regardless of the economy – they couldn’t see how they were going to be able to pull it all together. In the end, divorcing couples should believe they did the best they could given their circumstances and that they separated with a workable plan for the future – one that resulted in a faster, less painful divorce recovery period and one that eliminated the need to fight with attorneys over marital debt or alimony and child support issues – a stressful, expensive ordeal that can create as much debt and as many problems as it hopes to solve, and can make your divorce last forever.