How to get through divorce without going bankrupt

divorce bankrupt

Fact: Divorce is one of 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?

FAQ: 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

FAQ: How does bankruptcy affect divorce and 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

If your goal is to avoid bankruptcy during divorce, read on …

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

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, work with a mediator or choose collaborative divorce. But, research your options, first.

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.

Collect all the docs

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.

CIT Bank Money Market Account

Understand your home 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, or find a reliable gardener through TaskRabbit or!).

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).

Understand how much money you will need to live comfortably — and devise 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.

The first step is to create a budget. I like Tiller, an easy-to-use budgeting app.

Include your income — including child support and alimony.

Then subtract:

  • Housing
  • Utilities
  • 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 at the woman-focused investment firm, Ellevest.

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Get your credit in order

A strong 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 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, 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.

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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: bank, savings, credit card. 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 current score at CreditSesame 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? Try out Experian to keep track of your current credit score!

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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. LegalZoom can help you through this process.

For more on how to get a legally sound, affordable estate plan and will online, read How to get your will and estate plan online.

Amp up your earnings

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. Chances are, you will need to find ways to earn more money, sooner than later. 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.

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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. You can even look into taking on a part-time job to help supplement your income during those tough years. Check out FlexJobs, a deep database of part-time and full-time work-at-home, telecommute, online and flexible professional career jobs. It was started by a mom who wanted to earn a healthy living from. I elaborate on FlexJobs reviews and how they work here.

About Emma Johnson

Emma Johnson is a veteran money journalist, noted blogger, bestselling author and an host of the award-winning podcast, Like a Mother with Emma Johnson. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour,, 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.A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Read more about Emma here.

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