A 2013 study conducted by Kansas State University revealed that financial problems early in marriage are the most significant predictor of divorce. So, it comes at no surprise that when two people decide to make a split, newly-singles encounter financial difficulty. Whether you were already in debt previously or trying to avoid the monsoon of financial struggles you see coming, here are some practical tips to keep in mind as you work to rebuild your life.
- Tally it Up
No matter how much debt you are in or you and your spouse share, make sure you add take the time to add it all up. This includes auto loans, mortgages, student loans, and credit cards. You should be very aware of every debt amount and what name everything is in. Don’t leave any stone unturned, even if there are debts your former spouse may not know about. Take your debt and split it into two lists. 1) Debt brought into the marriage, 2) debt was incurred from the marriage.
- Work Out which Debts You Should Pay First
If you don’t have enough money to keep up the payments on all of your bills, loans, credit cards, or mortgage, it’s important to prioritize what you can pay and what loans are most important to your well-being. Your most important debts are usually your mortgage/rent and electricity bill. To ensure that you have a roof over your head and lights on in your house, make sure that you pay these bills before anything else. If you can’t make these payments, consider a temporary roommate to share the costs, re-entering the workforce, or picking up a second job until you get on your feet again.
- Sort Out Secondary Debt
Once you have made arrangements for your priority debts, you should work out just how much you can pay towards money you owe on bank loans and credit cards. If you can’t make the full minimum payments, contact your lender and tell them what you can afford. You may be able to restructure your loans based on your current financial situation. If you prefer to work out your credits with a debt professional, find out if you can freeze interest while you work out a repayment plan.
- Joint Debts – What to do?
If you have any joint debts with your former spouse, such as a mortgage, bank loan, or credit card, you are liable to pay the amount in full. That means that if your ex doesn’t pay their share, you are still responsible for the payments. Contact your lenders, inform them of the separation and request:
- A restriction on the account so debts cannot be further escalated.
- A lower payment agreement if you cannot repay the amount in full.
Once you have put measures in place to prevent further damages, try to make an arrangement with your ex-spouse. In order to protect both of your credit scores, try to divide the debt into what is fair, refinance wherever possible, payoff, and consolidate. You may require a mediation service in order to get agreements in writing.
- Don’t Think You’re Off the Hook
When it comes to marital debt, you’re always going to be responsible if it remains in your name – even if your previous partner has made an agreement to pay it after the divorce. If your ex stops making payments even years down the line, your creditors will hold you equally responsible for the debt that is owed. Working together after a divorce is tough, but essential to both party’s financial well-being.