If you are going through a divorce or have recently finalized one, you might be concerned about your financial future. It’s a valid worry, as divorce can significantly impact your finances. In some cases, it can even lead to bankruptcy.
That’s why it is crucial to understand the risk factors that could push you towards financial insolvency. In doing so, you can have a better chance of protecting yourself and your future.
Here are several risk factors to keep in mind.
Reduced income
After divorce, you are likely to experience a significant drop in household income, as many divorcees do.
This can be particularly challenging if one spouse is the primary earner or if you are accustomed to a certain lifestyle that is no longer sustainable on a single income.
Increased living expenses
Living alone often means shouldering all household expenses by yourself. This might include:
- Rent or mortgage payments
- Utilities
- Groceries
- Maintenance costs
You might also face new expenses like childcare if you are a custodial parent. These costs can quickly add up, putting strain on your new, potentially reduced budget.
Debt division
Florida is an equitable distribution state, meaning courts divide both marital assets and debts equitably between spouses. This means you might end up responsible for joint debts, or debts you did not even know existed.
Moreover, creditors may still come after you for joint debts even if your ex-spouse was assigned responsibility for them in the divorce decree.
Spousal and child support
If the court requires you to pay alimony or child support, these new financial obligations can significantly impact your budget. Courts typically calculate these payments based on your income at the time of the divorce, which may not account for future financial hardships.
Credit score impact
Divorce can negatively affect your credit score in several ways. Joint accounts that go unpaid, the need to apply for new credit or financial strain that leads to late payments can all damage your credit.
A lower credit score can make it harder to secure loans or credits when you need them. This can potentially push you closer to financial instability.
What you can do to protect yourself
You do not have to wait to reach the bottom of the hole before you can start digging yourself out of it. If you find yourself on the brink of financial insolvency, a bankruptcy attorney can help you explore your options.
By acting early and seeking advice, you can gain the tools to move on with your life—sooner rather than later.
