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How to avoid getting into debt after a divorce

A divorce is difficult time in anyone’s life. You are splitting from your spouse and starting a new life on your own. There are many decisions to make, and you want to make sure you are getting started off the right way.

One of your biggest concerns is likely your finances. It is not uncommon for people to struggle financially after a divorce. But if you plan carefully, you may be able to avoid financial struggles and falling into debt.

Divide your debt

You probably know that you divide your assets in a divorce, but you also must divide your debt. Debts you brought into the marriage typically remain your debts after the divorce. However, debts you and your spouse created together, like credit card debt or car loans, must be divided.

It is best to pay off joint debt before the divorce is final. If you cannot, you should at least try to close joint accounts. According to Money Crashers, you can then pay off this debt with joint assets or a repayment plan. The big thing here is if your name remains on an account, you are still considered responsible for this debt. After a divorce, if your spouse decides to stop paying on this debt, you are still responsible for it. It is wisest to try to remove your name from all joint accounts.

Consider whether you can afford the house

You may want to keep the marital home. You have a lot of good memories there, and you may love your neighborhood. Before you push to keep the house, go over your finances and figure out if you can afford to do so. If you keep the house, you will be responsible for the mortgage, the electric bill, the gas bill, the utilities and all the other bills you now must pay on your own. Plus, you must also pay for the upkeep expenses, like if your basement floods, or if the house needs a new roof. It is expensive to maintain a home, and you need to review your budget before you decide to take this on.

You must also refinance the home and update the title, so your former spouse’s name is removed from the mortgage and title. If your ex decides to keep the home, you will need to make sure he or she also refinances and updates the title, so your name is no longer linked to the house.

Review your entire budget

During a divorce, you also need to review your entire budget. Even if you do have a house or do not plan to keep it, you are still undergoing a huge financial change. You are no longer splitting your expenses with someone else, but it is unlikely your bills are being reduced by half. Make a list of all your fixed expenses like internet and car payments, as well as variable expenses like entertainment and clothing.

You may have to cut back by shopping at a cheaper grocery store, going out to eat less or downgrading your cable. Little savings like these add up and can help keep you from struggling paycheck to paycheck. You should also be putting some money away for emergency costs like car repairs or doctor visits. Having this extra money can prevent you from falling into debt.

Check your credit report

After the divorce is final, check your credit report regularly. If your divorce was contentious, your ex may open accounts in your name to get back at you. Or if your former spouse is struggling financially, he or she may default on your shared debt. You will want to know about either soon as possible, so you can protect your credit score, and keep creditors from going after you.

Despite your best efforts, you may struggle financially after a divorce. If you find yourself dealing with an overwhelming amount of debt, you have options. It may be time to restructure your debt through Chapter 13 bankruptcy or get rid of most types of debt through Chapter 7. Bankruptcy can be another good way to get a fresh start.

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