Divorce, Money and Debt: The Ties That Bind You
There are usually more than a few of financial responsibilities that tie married couples together.
And many of those couples also carry some degree of consumer debt, have retirement and investment accounts, and may even own a business and have children.
But out of all the financial considerations of divorce, the ones that provoke the most anxiety and may be the most difficult to deal with are: marital homes and debt.
Decisions about a home in the current economic climate, combined with the dramatic decrease in housing values, can make wise decision making about such a major on-going expense seem impossible, especially if the balance of a mortgage exceeds the value of the property.
As a Mediator and divorce financial strategist I spend far more time than in previous years working with couples who have little or no equity in their homes to find solutions that are fiscally sensible and sustainable.
But a martial home is only part of the story.
When you add up car loans, credit cards and student loans, many divorcing couples find themselves buried under debt that will take years to pay off.
According to the Federal Reserve, statistics show that consumers spend close to 18% of their disposable, after tax, income just to pay consumer debt and auto loans.
In addition, with the national average for credit card debt at $5,100.
00 per person, not per household, it's very easy to see why divorcing couples face real financial challenges.
In search of relief many people have turned to borrowing against whatever is left in their 401(k)'s to consolidate their debts.
While this may alleviate the problem of multiple high interest monthly payments, it comes with the cost of another monthly payment which is typically deducted directly from their paycheck.
Unfortunately, for those who are financially stretched beyond their incomes, the only real solutions are either debt consolidation loans or bankruptcy.
Couples with even moderately complicated financial circumstances must take the time to seek professional assistance and guidance before they can begin making any final decisions.
And they must also do their best to ensure that the information they obtain is from reliable, qualified sources and backed with experience in the area of divorce and finances.
This measure is especially true when it comes to mortgage refinancing.
It is possible to structure 'after divorce' debt repayment, and potentially avoid financial ruin, but it takes careful planning and consideration to do so.
Divorcing with a moderate to heavy debt load requires a scalpel approach as opposed to grabbing a hammer.
And if bankruptcy is not possible or not preferred, a detailed financial plan must be made to include both short and long term commitments and considerations.
The financial decisions that couples make during a divorce have the potential to impact their lives long after the ink is dry on their final decree which is why evaluating each financial aspect individually, with the proper guidance, is so critically important.
As an additional note, if a couple will be responsible for jointly paying marital debt after their divorce becomes final, provisions must be made and included in their final settlement agreement to clearly define the responsibilities of each spouse.
Provisions must also be made for any changes of circumstances that could occur that would prevent one or the other from being able to fulfill their commitment.
And many of those couples also carry some degree of consumer debt, have retirement and investment accounts, and may even own a business and have children.
But out of all the financial considerations of divorce, the ones that provoke the most anxiety and may be the most difficult to deal with are: marital homes and debt.
Decisions about a home in the current economic climate, combined with the dramatic decrease in housing values, can make wise decision making about such a major on-going expense seem impossible, especially if the balance of a mortgage exceeds the value of the property.
As a Mediator and divorce financial strategist I spend far more time than in previous years working with couples who have little or no equity in their homes to find solutions that are fiscally sensible and sustainable.
But a martial home is only part of the story.
When you add up car loans, credit cards and student loans, many divorcing couples find themselves buried under debt that will take years to pay off.
According to the Federal Reserve, statistics show that consumers spend close to 18% of their disposable, after tax, income just to pay consumer debt and auto loans.
In addition, with the national average for credit card debt at $5,100.
00 per person, not per household, it's very easy to see why divorcing couples face real financial challenges.
In search of relief many people have turned to borrowing against whatever is left in their 401(k)'s to consolidate their debts.
While this may alleviate the problem of multiple high interest monthly payments, it comes with the cost of another monthly payment which is typically deducted directly from their paycheck.
Unfortunately, for those who are financially stretched beyond their incomes, the only real solutions are either debt consolidation loans or bankruptcy.
Couples with even moderately complicated financial circumstances must take the time to seek professional assistance and guidance before they can begin making any final decisions.
And they must also do their best to ensure that the information they obtain is from reliable, qualified sources and backed with experience in the area of divorce and finances.
This measure is especially true when it comes to mortgage refinancing.
It is possible to structure 'after divorce' debt repayment, and potentially avoid financial ruin, but it takes careful planning and consideration to do so.
Divorcing with a moderate to heavy debt load requires a scalpel approach as opposed to grabbing a hammer.
And if bankruptcy is not possible or not preferred, a detailed financial plan must be made to include both short and long term commitments and considerations.
The financial decisions that couples make during a divorce have the potential to impact their lives long after the ink is dry on their final decree which is why evaluating each financial aspect individually, with the proper guidance, is so critically important.
As an additional note, if a couple will be responsible for jointly paying marital debt after their divorce becomes final, provisions must be made and included in their final settlement agreement to clearly define the responsibilities of each spouse.
Provisions must also be made for any changes of circumstances that could occur that would prevent one or the other from being able to fulfill their commitment.