When two spouses decide to divorce, the financial burden of setting up two separate households can become overwhelming, especially when the couple has become financially dependent on one another.
Couples are staying together in order to avoid debt now, more than ever. The downturn in the economy has made people wary of signing costly alimony agreements for the fear that the job market won’t allow them to keep up with payments. Attorn fees can shoot through the roof depending on the complexity of the divorce. The disastrous real estate market has left many homeowners owing more on their mortgages than their properties are worth, making what would normally be their biggest marital asset their largest liability. Fortunately, there are simple steps that divorcing spouses can take to lighten the financial load.
Creating Your Pre-Divorce Budget:
A pre-divorce budget can help you not only prepare for the financial burden of a divorce, but it can also provide you and your spouse with information that you need to plan for life after your marriage is dissolved.
- The first and most basic step in creating a pre-divorce budget is to list the income and expenses of each spouse, then see how they balance out. The list of costs may seem overwhelming at first, so a simple way to begin the list is with fixed expenses. This includes things that are necessary for day-to-day living like rent or mortgage, utilities, phone, cable and insurance costs. Once the necessities are listed, other expenses such as food, entertainment and child care will come naturally.
When it comes to tracking your income, don’t forget to take into account secondary incomes such as social security, unemployment, workers compensation, self-employment, stocks, annuities or support from other family members or former spouses. Be sure to gather records like tax returns, wills, trusts, bank statements, credit card statements, deeds and insurance policies before the divorce. This is an easy way to determine what types of lifestyle changes need to be made and can prepare each partner for what is to come after the divorce.
- Understand that courts will typically enforce a status quo, meaning that alimony and child support payments will be maintained at a certain amount depending on the spouses’ current incomes and financial state of affairs. Although altering these payments is possible, it is not a fun or easy process. To avoid future financial arguments and court dates, get any major financial obligations, such as getting braces or medical treatments for your child, out of the way before the divorce.
- Cancel all credit cards before your divorce is finalized. Although a judge will generally rule that one spouse is not responsible for the other’s credit card payments, credit card companies can continue to hold them responsible.
Navigating the Divorce with Your Attorney:
If possible, try to proceed with your divorce through mediation rather than litigation. Mediation is the process of using a neutral third party to help the spouses reach an agreement on the terms of their divorce, and litigation is the process of taking a divorce case through court.
While there are many benefits that mediation offers, the financial aspect might be the most luring one. In fact, divorces by way of mediation average a total cost of $2,000 – $5,000, while litigation can cost up to $20,000 per person. According to census data which factored in attorney fees, financial advice, counseling and real estate costs for buying or renting separate homes, a contested proceeding that goes to court can be expected to cost between $53,000 and $188,000.
Scott P. Davis is a Tampa divorce and family law attorney and founding partner of The Law Office of Scott P. Davis. Mr. Davis has handled hundreds of divorce cases and helped clients minimize costs and prepare for life after divorce.