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Financial Disaster: How to Deal with Divorce

Posted By timparker On 02/22/2012 @ 2:16 pm In Personal Finance | 5 Comments

According to the CDC [3], in 2009 the divorce rate was 50%. Per 1,000 people there were 6.8 marriages and 3.4 divorces. Looking at the data from the past three years, it might look like the trend is reversing as the number of divorces per 1,000 people has fallen in each of those years but the number of marriages has fallen at the same rate. Sadly, there aren’t a lot of negative life events with a higher degree of probability so being prepared and knowing what to do financially if it does happen, is well advised. It might not be such a well advised topic of conversation but what should you do to prepare for and deal with divorce should you be one of the 50% who ends up with a broken marriage?

Prenup

Anybody with a high net worth, has a sizable future inheritance, or has another reason why they would want some portion of their assets to remain theirs should talk to their future spouse about a prenuptial agreement. Other than protecting yourself in the event of a divorce, there may be other reasons why a prenup would not only protect you but also your spouse.

Get an Attorney

Legal Zoom or another do it yourself divorce filing isn’t going to work. You need the advice of an attorney in order to divide assets, settle debts, child custody, and other financial obligations. In addition, because divorces are usually emotionally charged, have an unbiased mediator can help to ensure fairness on both sides.

Make a List

Make a list of all of your marital assets. Your home, cars, insurance policies, investments, bank accounts, frequent flyer miles, and any other asset of any substantial value. The detailed list that you keep for your homeowners insurance is a great place to start.

Don’t pay an attorney an hourly rate to figure out who gets the pots and pans. Remember that the quicker you can come to an agreement, the less money it will cost you. Don’t be difficult for the sake of getting back at your spouse. You’re the one who ends up paying more.

Compile the Paperwork

Your most recent home mortgage, car loan, credit card and investment statements, tax returns, appraisal documents for jewelry and other valuables, business information if you or your spouse owns a business, documentation of future obligations, and any other financial document that may become part of the settlement should be copied and presented to your attorney.

The Kids

Your children didn’t cause the divorce so make sure they are taken care of in the best possible way. Figure out what it will take to adequately support your children and make sure they have what they need.

Divorce almost always has a person who wants the divorce and the person who doesn’t. Maybe in your case it’s a mutual decision but if you’re the one asking for the divorce, make sure you have talked to a marriage counselor and spent a lot of time looking for alternatives. Financially, divorce will wreck your finances and it will take a long time to recover. Relationally, the results can be even more devastating.


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[3] CDC: http://www.cdc.gov/nchs/data/nvsr/nvsr58/nvsr58_25.pdf

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