How to get through divorce without going bankrupt

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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, according to the Institute for Financial Literacy:

How can you survive divorce, and not only stay financially solvent, but also thrive?

How much is a divorce?

The cost of a divorce can range from under $500 for a DIY filing, into the tens of thousands of dollars. Typically, the more money you and your soon-to-be spouse have, the more a divorce can cost — and the greater chance of going into bankruptcy. Get a general idea of the cost by contacting local divorce or family law attorneys through free or discounted initial consultations.

Online, DIY divorces services like Rocket LawyerLegalZoom, Avvo and Justia provide free legal information searchable by state. Check with the school of law at your local college or university. Some offer free legal clinics to the public.

If your breakup is more or less amicable, with few assets and a general agreement about how time sharing with any children will be established, do-it-yourself online divorce services can be a great option. This is an option for uncontested divorces — where both parties agree on major decisions about child custody, spousal support and how assets are divided

If you’re going DIY, you will need to:

  • Check with your state and city or county clerk of the court to understand paperwork submissions and filing fees.
  • Choose a reputable document preparation service like Rocket Lawyer or use free resources provided by your state, city or county.
  • Create a detailed account of your divorce. Provide documentation about all parties, vital records, and decisions about child custody, support and property division.
  • Know the process and cost of serving your spouse. According to Oregon-based National Association of Professional Process Servers, the average cost is between $20 and $100.

3StepDivorce is another great option that provides you with all the legal documents, online storage, and instructions for filing in your state. A+ Better Business Bureau rating and a money-back guarantee your papers will be accepted by your local courthouse.

Get started with 3StepDivorce for $84, and qualify for a $50 rebate now >>

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.

How to file for divorce 101 — the basics

Can you file for bankruptcy during divorce?

Technically, yes, but there are reasons to file for bankruptcy either before, during or after a divorce, says Patrick J. Best, a bankruptcy attorney with ARM Lawyers in Pennslyvania. Best says:

  • Sometimes, filing bankruptcy before a divorce can be best. If the couple has quite a bit of debt, divorce can become a fight about who is going to pay the debt back. Filing bankruptcy before the divorce allows the debt to be discharged so that the couple does not need to worry about dividing debt.
  • Filing a bankruptcy during a divorce can have a similar effect. If during the divorce you find that you are simply arguing over debt, a bankruptcy can help resolve that issue.
  • Depending on how the divorce was resolved, you may wish to file bankruptcy after the divorce is concluded. Sometimes debts owed to your ex-spouse may be discharged in Chapter 13 bankruptcy. That means that in addition to no longer owing your consumer debt, you would no longer owe money to your ex-spouse.


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

What to consider if you are thinking about divorce — but are not sure

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

Does bankruptcy stop divorce proceedings?

If you have a pending divorce case, a bankruptcy filing will not affect custody or child support, but a bankruptcy filing will stop proceedings related to the division of property.

Does filing bankruptcy affect alimony?

Whether alimony is ordered as well as the sum ordered can be affected by any change in finances by either party.

5 tips for a quick divorce

How to file for bankruptcy during divorce

Timing is important when it comes to divorce and bankruptcy. What you need to know …

How soon can you divorce after bankruptcy?

From legal site Nolo:

Chapter 7 bankruptcy is a liquidation bankruptcy designed to get rid of your unsecured debts such as credit card debt and medical bills. In Chapter 7 bankruptcy, you usually receive a discharge after only a few months. So it can be completed quickly before a divorce.

By contrast, a Chapter 13 bankruptcy lasts three to five years because you have to pay back some or all of your debts through a repayment plan. So if you were looking to file a Chapter 13 bankruptcy, it might be a better idea to file individually after the divorce because it takes a long time to complete.

Nolo

How to file for bankruptcy 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.

Should I file for bankruptcy during or after divorce?

Wait to file for bankruptcy until after your divorce is finalized. This might be part of your divorce negotiations, and things you ask for in your divorce settlement.

When you’re thinking about divorce and bankruptcy at the same time

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.

Searching “bankruptcy attorneys near me?” What to do first:

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.

RocketLawyer review: Divorce legal help and documents for cheap

Get immediate answers to legal questions from a licensed family lawyer or bankruptcy attorney through JustAnswer, which provides expert advice via chat, for prices starting at $5/week unlimited.

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).

Get free bankruptcy forms online

RocketLawyer has a whole suite of documents for managing our debt, bankruptcy and divorce, including:

  • Bankruptcy worksheet <== FREE
  • Letter to request a credit report
  • Personal finance statements
  • Credit report challenge
  • Request to return or destroy a credit report
  • Response to payment request
  • Hardship letter
  • Loan modification letter
  • Debt validation letter

“Divorce bankrupted me.”

An amicable divorce is highly recommended for so many reasons, including that an uncontested split is l0w-cost, so you can use any would-be attorney fees to pay down your debt!

Divorce bankruptcy story from Kate:

I spent nearly $20k to get divorced; he currently owes me $10k in lawyer fees and $25k (and growing) in support but has no intentions of ever paying either.I had quit my salaried career to run our family-owned business, which I had to stop working at to get away from his toxicity and focus on rebuilding my financial independence.

Two months after our divorce was final, my vehicle was repossessed, and I was one more missed payment away from the marital house that I was awarded in the divorce going into foreclosure. In 2020, I stopped being trapped by fear, stepped out of my comfort zone, and started my own business. Thankfully, I also had the support of an amazing village of women I have surrounded myself since escaping my marriage. And wow! My business grew faster than I ever imagined!! It was scary and still doesn’t feel real sometimes — and I don’t know that I would have found the courage if not for the encouragement of my village.

So … yeah, divorce broke me — financially, emotionally, mentally, physically. At least he tried to. And while it was really touch-and-go for a while, I chose to surround myself with positive, encouraging people and was determined to never give up … and now I have rebuilt my life to something so much better than it was before.

Advice: Don’t rely on child support and find a way to become financially independent. Find at least one person to be your encouragement when you need to borrow some courage and strength in the difficult times. Persevere.

A divorce bankruptcy story from Essa:

My ex-husband opened multiple personal and business loans, lines of credit, and credit cards using my credit because it was immaculate when we met. Of course, he promised I would get it all back and more once his business took off. I was young and too trusting.

I had to file bankruptcy 2 years post-divorce. Debt counselors had been telling me there was no way I’d ever get it paid off in that situation. I was stubborn and kept paying on it for a couple years but eventually admitted I was not going to get it paid off and filed. It was a huge relief.

I got a secured credit card at my credit union to build my credit. 6 years later I bought a house. Now 10 years after filing, I have a good credit score despite having to go back to court multiple times. He’s still broke. 🤷🏻‍♀️

This bankruptcy success story from Jana:

Although my divorce decree stated that my ex was responsible for his half of the credit card debts that he had run up, I knew that he’d never pay them and they were in my name.

I opted not to file for bankruptcy and ended up working OT for the next 16 months to pay off the $25K+ debt.We divorced in June 2017 and I was completely debt-free by the end of 2019.

Bought my first house as a Single Mom in February 2020, a new car in December 2020. My 4.5 year old and I are thriving! We are happy, safe and debt-free (other than the mortgage, ha!). Dig deep because you never know how far you can go when you are set, focused and determined on a goal.

Read T. Lane Dough‘s answer to How is it possible that people go bankrupt during divorce in the USA? Isn't it a 50/50 split? on Quora

Related:

Learn more about estate planning for single parents.

To repair your credit, there are DIY credit repair and credit repair options to consider.

Educate yourself about how property is divided in a divorce.

 Car buying for women for everything you need to know.

How single moms can pay off debt

Best money saving tips for single moms

Wealthysinglemommy.com founder Emma Johnson is an award-winning business journalist, activist, author and expert. A former Associated Press reporter and MSN Money columnist, Emma has appeared on CNBC, New York Times, Wall Street Journal, NPR, TIME, The Doctors, Elle, O, The Oprah Magazine. Winner of Parents magazine’s “Best of the Web” and a New York Observer “Most Eligible New Yorker," her #1 bestseller, The Kickass Single Mom (Penguin), was a New York Post Must Read. As an expert on divorce and gender, Emma presented at the United Nations Summit for Gender Equality and multiple state legislature hearings. More about Emma's credentials.

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