Fact: Divorce is one of the leading predictors of both bankruptcy and home foreclosure.
Women are especially prone to a long-term financial fallout from divorce.
Within a year of the end of their marriages, women are three times more likely to live in poverty than men, according to U.S. Census Bureau data. The London School of Economics research found that women experience a 20 percent decline in income when their marriages end.
The financial pain continues into retirement age. According to a 2014 report by the General Accounting Office:
- 4% of married men and 5% of married women over the age of 65 live in poverty
- 11% of divorced men and 18% of divorced women live in poverty
How can you survive divorce, and not only stay financially solvent, but also thrive?
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Why is divorce so often cited as a reason for bankruptcy?
Again, after divorce, many people find their finances stretched. Some have to pay alimony, others find they're paying for new expenses such as child care, and most will find their expenses increased because they're no longer splitting bills with their now-ex.
Some people are pushed into bankruptcy by their former spouse. Let’s say they owned a house together but they either don’t want to sell it (because they want the children to keep living there) or they can’t sell it because it’s upside down. One of them agrees to pay the mortgage; it might be the spouse who lives there, or it might be the ex who is supporting him or her. But the mortgage doesn’t get paid. Maybe that spouse eventually files for bankruptcy, and the other one ends up having to file in order to keep the house and catch up on payments, or to discharge their responsibility for the remaining loan.
Can you file for bankruptcy during divorce?
Technically, yes, but you probably want to file in advance of your divorce, or after. Benefits of filing before your divorce (and not trying to overlap the bankruptcy and divorce):
- You may save on attorney and filing fees by using the same bankruptcy lawyer as your husband or wife
- You may qualify for more exceptions in the bankruptcy if you are married
- The divorce proceedings can be simpler if you have discharged debts
Should I file for bankruptcy during or after divorce?
Wait to file for bankrupcy until after your divorce is finalized. This might be part of your divorce negotiations, and things you ask for in your divorce settlement.
How does bankruptcy affect divorce proceedings?
- If you and your soon-to-be ex are working with the same divorce lawyer, and one of you files for bankruptcy, you will each have to find a new attorney — as this creates a conflict-of-interest for the lawyer.
- If you have filed for divorce, filing for bankruptcy will stop the division of property proceedings
How do I avoid bankruptcy during or after divorce?
If your goal is to avoid bankruptcy during divorce, read on … But in summary:
Take all steps to ensure financial stability after your divorce, including living in a home you can comfortably afford, legally dividing debt with your ex husband or ex wife, watch your credit, build your credit score, work with your accountant on tax filings after divorce, and focus on earning, saving and investing.
- When you’re thinking about divorce (but not yet sure)
- Meet with a lawyer
- Call your accountant and financial planner
- Collect all the docs
- Understand your home's value
- Understand how much money you will need to live comfortably — and devise a plan to earn it
- Get your credit in order
- When you’ve filed for divorce
- Get and maintain your own accounts
- Continue to monitor, build and grow your credit
- Change your estate plan
- Amp up your earnings
- Find high-paying work-at-home careers
When you’re thinking about divorce (but not yet sure)
Maybe you are exploring your options, or actively planning your escape. Perhaps it is a mutual, mature decision, or you are leaving a dangerous situation. The advice for all these situations is the same: plan, secure your own money, earning power and legal and financial information.
Try to be calm-headed and get the emotional support you need, so you make rational decisions from a place of confidence and security, opposed to fear and panic.
Meet with a lawyer
First, educate yourself about how assets, property and debt are divided in divorce.
Many family and divorce lawyers offer a free first visit, which can not only give you a sense of whether this person is a good fit, but you can get free legal advice. Take notes! You may choose to DIY your divorce online, work with a mediator or choose collaborative divorce. But, research your options, first, including RocketLawyer.
CompleteCase is another great option that provides you with all the legal documents, online storage, and instructions for filing in your state, for a flat fee of $299. Check out CompleteCase now >>
Call your accountant and financial planner
Tell them what is on your mind, and ask them what information you need to collect, and moves you should make to help you make your decision.
Research what you need to know about taxes, divorce and filing as head of household after a separation.
Collect all the docs for divorce
The more you know about your financial situation, the better your chances of making wise decisions from a place of confidence and knowledge — not fear and panic. In initial meetings with attorneys, the more information you can provide, the better advice they can offer.
Also, it is very common for spouses to enter the divorce process with huge blind spots in their financial picture. Collect:
- Tax returns for the past three years
- Pay stubs and W-2s for both partners for past three years
- All bank, savings, investment, and retirement accounts. Note whose name is on each of these accounts.
- Statements for all debts: mortgages, home, student, credit card, medical, family and friends. Again, note whose name is on each.
- Estate plans, including wills, durable power of attorney, trusts and life insurance.
- Monthly household budget, including child care, school tuition, kids’ extracurricular activities, utilities, and food.
- Employment contracts
- Pension statements
- Health insurance information. If your family relies on your employer’s plan, get the most current information on the premiums for a whole family, single person, or one parent and children. Find out this information for your spouse’s employer, and / or, on the marketplace.
Understand your home's value
Your home is likely your biggest investment, and one of the highest-conflict issues in divorce. Locate your mortgage statement, understand whose name is on the note, the interest rate, and remaining balance. To understand whether you can afford to keep the home, or whether it makes sense to sell, calculate property tax, home association fees, utilities, repairs and maintenance (either commit to doing all the lawn work and house cleaning, or find a reliable gardener through TaskRabbit and a housekeeper on Care.com!).
Then, research your home value on Trulia or Zillow, to calculate any equity you have in your home (which should be split between you and your spouse, assuming you bought the home together and a prenuptial agreement does not preclude this).
How much money you will need to live after divorce — and make a plan to earn it
Alimony law is changing quickly, and lifelong maintenance is quickly becoming a thing of the past. Stay-at-home parents may receive short-term alimony until they can rebuild a career, and increasingly, as women earn and achieve professionally, it is the ex-wives who are required to pay spousal support, as well as child support.
Include your income — including child support and alimony.
- Cell and internet
- Child care
- Diapers and formula if you have a baby
- Groceries and restaurants
- Car costs, including payments, gas, insurance, repairs
- Insurance, including medical, life insurance, disability, homeowners or renters,
- Debt repayment
- Kid expenses like school lunches, school and activity fees, orthodontists, camp, clothes, allowances
Do not ignore retirement and other long-term financial planning. I understand that you are likely stressed about your month-to-month budget, but even modest planning now. Get a free financial plan + $50 to start investing at the woman-focused investment firm, Ellevest — just use this link to sign up. (Read: Ellevest review)
Repair your credit after bankruptcy and divorce
Credit fraud and and identity theft are very common during divorce — for both adults and children.
Further, a good credit score and history are critical to landing on your feet after divorce. After all, you are likely to need a credit card to pay for attorney fees and establish a new household, as you may need to find a new apartment or finance a new or existing mortgage, or otherwise obtain credit to move into your new life.
Run a credit score check on yourself and your spouse, and work to clear up any errors or defaults. Understand which accounts you are responsible for, and prioritize making sure these are up-to-date, and error-free.
Understand that in a divorce, any debt shared by the two of you will de divvied up — but that does not affect your agreement with the lender. So, if your spouse will be held accountable for the balance on a shared credit card, understand you are responsible for that debt until your name is removed from the card.
If you have a short credit history, bad credit, or no credit history, open a secured credit card, charge on it monthly, and always pay off the balance on time to build your credit. (Resource: Find a secured credit card)
To repair your credit, there are DIY credit repair and credit repair options to consider. While cleaning up your credit report is worthwhile, it's also time consuming, so check out The Credit People if you need to repair your credit, but you're short on time.
When you’ve filed for divorce
One of the most common mistakes that divorcing couples make is to ignore the monthly bills, assuming that the other is paying them, or that failure to pay will harm the other. Take neither of these ideas for granted. The most important thing you can do during this time of transition and turmoil is stay on top of your mortgage, taxes, utilities, credit card and other debt, insurance, and tax bills.
Get and maintain your own accounts
When it has been established that a divorce is happening — regardless of whether or not both parties agree — quickly move to separate all your accounts: checking account, savings account, and credit card. CIT Bank has one of the best offers with a 1.85% savings account.
It is common for one party to withdraw large sums of money, or make large charges on a credit card, without the other’s knowledge or consent. If you are tempted to make such withdrawals and charges, don’t! You will likely be held accountable later, and this will heighten any conflict in the proceedings — which will only cost you in attorney’s fees and ill will with your ex.
If you have a shared cell phone plan, get your own line for the sake of privacy, and as a step towards you own, independent life.
Continue to monitor, build and grow your credit
No matter what the court orders and settlement agreements say, divorce is one of the most common times when errors, fraud and damage can happen to your credit. Check your credit score for free at Credit Sesame to find out where you stand. Then set up alerts for any flags on your credit report, and keep an eye on your score as accounts are opened, closed and names are removed.
Remember: even if an agreement or court order mandates your ex make payments on debt you once shared, you are still responsible for that balance as long as your name is on the account. By the way, do you know what your score is right now?
Change your estate plan
You may never have had an estate plan in the first place. Regardless, now is the time to revisit your will, trusts, legal power of attorney and other legal documents must be revised to reflect your new life. Companies like Rocket Lawyer and LegalZoom can help you through this process.
Learn more about estate planning for single parents.
Increase your income after divorce
At least in the short-term, both parties are poorer after divorce. It is twice as expensive to maintain two homes instead of one, and you may find yourself making alimony and child support payments, which can be steep, and your attorney can help you understand what to expect.
This may mean buckling down on your goals in your current job, discussing with your boss a plan for advancement, asking for an overdue raise, or strategizing to change companies, launch a side business, or return to school to switch careers altogether.
If you are currently staying home full-time with children, it is time to get back to work. Alimony law is changing, and judges expect both parents to work full-time. Child support should not be expected to cover all of your expenses. Plus, a career of your own is the best financial security for you, your family, and your relationship with your ex-long-term.
Regardless, the sooner you take steps to improve your income, the quicker you will move forward after divorce.
Find high-paying work-at-home careers
Thanks to technology and a changing work culture that values parents and is happy to offer flexible, temp, telecommute, remote and other work-at-home opportunities, there are countless quality, legit jobs and careers that pay well, and also provide the flexibility to spend time with your family, working out, build a side gig, or otherwise enjoy life.
In fact, working from home tops my gratitude list most days, as it has allowed me to devote concentrated sums of time building a business that I love, pays well, and allows me to spend as much (or little! Let's e real here!) time with my kids as I need to.
Check out the top, high-paying careers that you can do from home.
The list includes: programmer / coder, graphic designer, translator, virtual assistant, social media manager, corporate event and travel planner, bookkeeper, child care provider, blogger and grant writer.
My favorite job board for moms is FlexJobs — the leading job site specifically for telecommuting, part-time, flexible-time, online, work from home, and other alternative work arrangements that make such a big difference in families’ lives.
FlexJobs was started by Sara Sutton-Fell, a real-life mom who wanted to work from home, earn a good living, and spend time with her family.
Quick facts FlexJobs review facts:
- Huge database of screened and vetted (no scams!) temp, part-time, full-time, remote, online and other work-at-home jobs. At time of writing, FlexJobs posted:
- 32,686 positions
- 5,594 hiring companies
- Extremely reputable:
- Better Business Bureau A+ rating
- Appearances in the Oprah magazine, Inc., Good Morning America, USAToday, Washington Post, New York Times, and Wealthysinglemommy.com ;)
- Every company in FlexJob's database has been screened by hand, and found to be legitimate.
- Job posts and featured hiring companies are hand-vetted by FlexJobs employees. Many of the postings are by Fortune 100 and Fortune 500 jobs.
- Affordable pricing:
- $14.95 / month
- $29.95 / quarter
- $49.95 / year
- 100% satisfaction guarantee — cancel anytime, and get a refund if you are not happy with the job selection
- Easy-to-use site
- Go to FlexJobs.com (use promo code FLEXLIFE)
- Browse for free
- When you become a member, you can create a profile, upload a resume, and interact directly with hiring managers
- FlexJobs suggests postings for you based on your preferences and resume
- Search by newest postings
If you need fast, extra cash (not necessarily a new job or career), here is my list of 101 ways to make extra money. Advice includes easy ways to sell things you have, the best online survey companies, online English tutoring, and rent stuff you own, like your home or car.
Emma Johnson is an award-winning business journalist, noted blogger, and bestselling author. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post's ‘Must Read” list.
Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer.