Focused on running my business and raising my young family, I trusted my then-husband to manage our finances. But life soon began to unravel when I noticed that my husband was not disclosing our true financial position. There were multiple debts to a long list of lenders. Devastatingly, this list included members of my family.
In subsequent years, my children and I experienced a complete change of lifestyle. I lost my business and was plagued by debt collectors unable to find my husband. Whereas I was once a confident marketing guru, I found myself working numerous jobs and worrying about how I would afford to educate and provide for my children.
I am not a legal or financial professional; I can only speak from my experience. But below are four financial points that I wish I thought of during my own divorce.
Resolve Shared Debt
Most long term relationships are accompanied by shared debt – think mortgages, car loans and credit cards. After separation, this can become a big problem.
You may not have benefited from any money that your ex-partner borrowed. You may not have been aware that money had been borrowed in the first place. But as a spouse, you may very well be liable for part of that debt.
This was a major complication after my marriage. When it was clear that my ex-husband wasn’t going to pay his debts, I was the next point of call. As a result, I was inundated with bills and demands from creditors I had never met.
Wherever possible, resolve all of your shared debts during your settlement, and make sure that no joint debts are solely in your name. This way, you are more likely to avoid paying more than your fair share.
Stand Your Ground in Property Settlements
Deciding who gets what in a settlement is an exhausting process. Above all else, don’t allow others to push you around – claim what is rightfully yours.
Even if your name is not on the title for your home, you may still be legally entitled to a share of that property. But be aware that when something isn’t in your name, you do not need to be notified of sale. In other words, your ex-spouse can legally sell the property without your knowledge. This causes problems if you have not yet reached a settlement agreement with your ex, and may leave you out of pocket…big time!
The best way to stay in the loop is to apply for a caveat, which ensures that no sale of the property can go ahead without your approval.
Although taking legal action is tedious, it is ultimately better than risking financial ruin down the track.
Clear Your Debts After Divorce
After divorce, the way you approach debt repayments may prove the difference between bankruptcy and stability. Don’t just throw the same repayments at each of your creditors every month. By so doing you only waste money on interest.
Instead, use the snowball method to approach your debt:
- Make a list ordering your debts from smallest to largest.
- Designate a fixed amount to contribute toward clearing these balances every month. Make this amount the minimum payment on each of your debts,
except the smallest one.
- Dedicate every spare cent of your remaining finances toward paying off the lowest debt.
- Once you clear your first debt, keep paying the minimum payment amount on all of your larger debts, except the one with the next-lowest balance.
The fewer debts you have, the less interest you are paying, and the faster you will pay off all of your debts in the long run.
The technicalities of divorce and bankruptcy are difficult to comprehend. While you may stumble upon articles like this one online, the information derived from experience ultimately doesn’t measure up to that of a professional.
A divorce attorney can be well worth the investment but may also be an expense that you can’t afford. In this situation, remember that a law firm isn’t your only option.
The Salvation Army, Lifeline, Legal Aid and women’s centres across the country all offer a range of financial counselling and/or legal support free of charge.
Don’t delay accessing the support that you need now. Speaking to a professional today will save you a major financial headache tomorrow.
Approaching Bankruptcy with Strength
If my experience has taught me anything, it’s that bankruptcy should always be considered a last resort. It is a viable way to manage your debt and gain a semblance of stability. But it also comes with personal and practical limitations.
That said, sometimes bankruptcy is inevitable. There was no way I could have paid back all of my ex-husband’s debt. And when all is said and done, it may be your only option as well.
Despite the hurdles that your future holds, don’t let your financial situation get the better of you emotionally. You can be suffocated by your financial restrictions. You can feel disempowered by your credit rating. But always remember that we are more than our money.
You aren’t walking this road alone.
About Julie Rainbow
Julie Rainbow is the Director and Founder of Clarity Road: a website that helps women experiencing life changing events. In another life, Julie was the General Manager of a multi-million dollar technology business, where her core responsibilities included corporate growth, company management, relationship management and marketing. She now dedicates her life to helping others improve their own. Through Clarity Road, Julie and her team offer a wealth of free information on legal, financial and emotional issues, and guides women toward their own light at the end of the tunnel. For more information visit the website: www.clarityroad.com.au