Could You Financially Handle a Divorce?

Divorce is not a Fun Subject. However, it’s something that many people have to deal with — and it’s something that can have a big impact on your finances. Understanding your situation, and preparing yourself to deal with the possibility is a requirement if you want to financially survive a divorce.

Do You Know What’s Happening with Your Household Finances?

The first step is to understand what is happening with your household finances. Are you aware of what is going on with the money in your home? It makes sense to understand the cash flow at your house, understanding where the money comes from and where it goes. What accounts do you and your spouse have jointly and separately? While you don’t need to be in your partner’s business if you have separate accounts for fun spending, you still need to be aware of the account, and have an idea of how much money is going into it.

Be aware of your family’s financial situation, including debt and investments, so that you aren’t caught by surprise. The last you thing you need in this situation is an extra financial surprise.

Dividing the Assets

This is probably one of the tougher aspects of divorce, especially if you have combined your finances and you have been together for a long period of time. When your finances have been inextricably linked for years (or even decades), it’s hard to figure out what each person should get. One solution is to simply liquidate everything and split the results.

In some cases, it’s possible for things to go through somewhat amicably, with both partners sitting down with a mediator and coming to an agreement. At other times, lawyers get involved and judges make decisions. When the lawyers get involved and things get drawn out and ugly, most of the time the legal system eats up most of the assets.

You also need to think about the children, if kids are involved. Figuring out custody is one thing, but you also have to consider such matters as child support and who gets to claim the children as dependents on the tax return. Working this out can be complicated or straightforward, depending on how all parties react to the situation.

What about Debt?

If you have debt, you will also have to divide that up. If you have separate accounts, you each are generally responsible for the debt. Make sure that, if you have your soon-to-be-ex spouse listed on your account as an authorized user that you have him or her removed.

Joint debt is something that you are both responsible. If you have joint accounts, such as mortgages and car loans and even some credit cards, your creditors will hold you equally accountable. If one of you agrees to take care of the debt (or if the judge orders it), you need to have the account re-named so that the responsible partner is the only person listed. A judge can tell your ex to pay on the account, but if he or she doesn’t abide by the decision, your credit can still be ruined if you keep it as a joint account.

As always, divorce laws vary by state. Make sure that you understand the laws in your state, and that you take steps to protect yourself as much as you can.