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In compliance with Bill 14 S(10) Access to Justice Act 2006, Partners Part Peacefully ® does not provide legal advice (the application of legal principles to an individual's specific circumstances). If you require legal advice or legal services please contact a lawyer.  Partners Part Peacefully ® is a Registered Trademark of Hazel Lamarre.

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Debt-Free Divorce

May 11, 2015

 

A divorce is both an emotional separation and a financial one. You will experience many unpleasant emotions, but you will also have financial situations that you must manage and resolve. The degree to which you resolve and reduce financial issues has a direct impact on the emotional intensity and duration. The two things that are likely weighing on your mind are:  1). Debt and 2) Income.  Let's first get rid of any guilt you might have around planning your divorce. It is perfectly natural to want make a plan to put yourself into the best financial position possible before the divorce and facing life as a single-parent. Life is stressful and children, houses, food and clothing etc. expensive.  You do not want to base your future financial life on scrimping and buying discount to keep your head above water.  You want to try to maintain your standard of living.  Realistically, in divorce standards of living for both parties become somewhat lower, but you can plan to make it as good as it possibly can be.  So let's begin.  You want to try to be debt-free before you divorce?  Is there is a big purchase that is being discussed right now, like a new car, house renovation, new furniture, expensive holiday, for example?  If this is the case, then you will want to express your lack of interest in making these purchases as well as ensuring that your signature would be required for such purchases.  You do not want to be in the position in your divorce where it looks like you consented to the joint purchase, where you have to take responsibility for half the debt from the purchase or having to find a way for your spouse to financially afford the debt.  Any debt that you have at the time of your divorce when you shop for a new home will be a factor in both your ability to qualify for a mortgage and the amount of the mortgage you will qualify for.   In your planning, you will want to address the amount of debt you have, the type of debt and your repayment of the debt. Paying off the debt is the first priority.  Consolidating as much as possible on a financial account, ideally in your name (being the "saver" of the family), with the lowest interest rate (make sure you know the terms of those accounts ie; limited time offer on transfers) so that you have one payment.  It makes it simpler, costs you less and pays down faster.  List the expenses that this account is to be used to pay and then lower the limit.   If necessary, cancel supplementary cards to this account. This will help control the spending. Next, close and cancel the accounts and credit cards you have paid off and/or are open and don't want used.  At this point you are working with your spouse to better your financial position and ease the stress and strain caused by financial issues. Perhaps you will discover that fixing the financial issues can help your relationship and even save your marriage.  Or, at least, at the time of  divorce you will both be in a better financial position.  At that time you will want to shop for a mortgage to find a new home.   The mortgage lenders will run your credit report which lists all of your loans on record and a history of your payments.  The lenders are not only looking at your debt load, but also your "money personality".  What this means is that they are looking at how you manage money. For example, do you accumulate too much debt, accumulate debt but regularly miss payments,  declare bankruptcy or have collection claims against you.   You want that report to show you to be in the best financial health. So plan and take action to have a debt-free divorce. 

 

Final Word:  When considering your debts and divorce, know that there is more than one arrangement that reaches the required equal division.

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