Divorce and bankruptcy are often linked. Part of this is that divorce itself can be expensive. A person with limited savings may spend almost everything they have getting divorced, meaning that they then have to file for bankruptcy because the rest of their debt is unaffordable.
It is also important to note that divorce itself changes a person’s financial situation substantially. They may find that certain debts they took on before the marriage are no longer affordable once they are living on a single income.
The family home
One example of this is when people want to keep the home in the divorce. They do not want to have to move, and they want the stability of keeping the same house.
In many cases, the first step is to refinance their mortgage. This loan can become cost-prohibitive for some couples. Someone may not qualify for a mortgage on one income, even if they did on two, when they applied jointly with their previous spouse.
But even when a person qualifies for the new mortgage, it dramatically changes the percentage of their income that goes toward housing costs. Additionally, they have to take on the full cost of maintenance and upkeep, and they must pay utilities, home insurance, yearly property taxes and more. Many people think that they got what they wanted if they keep the house through the divorce, only to find out after the fact that it does not make financial sense and they cannot afford to pay their bills.
If you find yourself in this position, it is important to understand the bankruptcy options you have and the legal steps to take to create a positive financial future.
