Many individuals experience financial difficulties due to a divorce, but it’s possible to avoid bankruptcy by taking the right steps throughout and following the divorce process. The costs of attorney fees, child support, alimony, debt, and other expenses can get out of hand, but there are ways to avoid financial devastation and recover.
Increased Costs After a Divorce
Due to the many costs that individuals can incur after filing for divorce and completing the process, they can easily fall into debt. That debt can lead to even more debt due to late fees and other penalties. For example, credit card interest rates could increase dramatically, to the point where paying off credit card debt requires costs that are as large as the ones initially leading to debt. Over time, this could lead to bankruptcy as people become unable to pay off the debt entirely.
Oftentimes, divorcees don’t anticipate bankruptcy as a potential problem, largely because the government doesn’t report divorce as a cause of bankruptcy. Instead, public reports of bankruptcy typically list other reasons such as consumer or credit card debt in lieu of divorce or overspending.
Even after an individual goes bankrupt because of a divorce, it’s important to keep in mind that debts may still remain in place. Some of the debts that individuals may still need to cover even after going bankrupt may include child support, alimony, student loans, court-mandated payments toward the spouse’s attorney, or debt resulting from fraud.
Benefits of Filing a Joint Petition
Planning ahead can make a divorce more cost-effective and ultimately less complicated with the right approach. Bankruptcy begins as soon as individuals, businesses, or married couples file the necessary paperwork with the court. Filing a “joint petition” as a married couple consolidates both spouses’ information in a single group of documents.
Filing a joint petition offers a couple of key benefits. For example, it will help discharge both spouses’ qualifying debt, and it costs less to file bankruptcy together. Generally filing together can help make the divorce process both simpler and cheaper.
The filing fees for filing bankruptcy individually or as a couple will be the same, which means a joint petition could help cover certain legal fees. Additionally, bankruptcy lawyer fees may be significantly lower compared to what they would be when filing individually. On the other hand, it’s important for couples to indicate to an attorney that they wish to file together, as some attorneys may see it as a conflict of interest to provide representation for both parties.
Additionally, filing for bankruptcy prior to the divorce process could reduce divorce costs through streamlined property and debt division.
Avoiding Bankruptcy and Recovering Following a Divorce
There are several factors that can help determine how to approach divorce and bankruptcy. Working with professionals such as bankruptcy attorneys can help determine the best move to make based on their individual situation. By developing sufficient plans for finances and payments, or filing jointly as opposed to separately, individuals can avert financial disasters after completing the divorce process.