Educating Yourself on Dealing with Divorce Debt

It is common knowledge that when a marriage ends, finances often need a complete overhaul, and significant debt is often a product of splitting assets and building a new life. Dealing with divorce debt can sometimes be incredibly difficult, especially when it is coupled with the emotional turmoil that often accompanies the dissolution of a marriage. That being said, the best way to move forwards is to deal with those things that can increase your stress.

First, make an appointment to establish a budget. A professional financial consultant can help you go over all of your finances and create a budget that sticks to your post-divorce lifestyle. Since your monthly monetary intake will change significantly post-divorce, facing this head-on is crucial. Once you are on your own, it is even more essential to live within your financial means. Your lifestyle will change, that is inevitable, but creating a budget that takes this into account is an intelligent way to ensure that monthly bills are paid on time, all the time.

Has divorce created debt that seems insurmountable? You are not alone. Many divorced couples, after a divorce is finalized, find themselves faced with debt that accrued as a result of this event. The splitting of assets, selling a home, lawyer fees, etc. can mean a much higher debt load than was owed previously, and so dealing with divorce debt right away is important. If you don’t think that you can handle the debt that has built up over the course of the proceedings, you are like many other individuals out there, so don’t worry, there are options available to help you overcome this hurdle.

Debt consolidation. A debt consolidation is an important option to consider now that your income has been cut in half. This is because a debt consolidation will consolidate all debts into one (hence the name), meaning far less interest being paid monthly, and one convenient monthly payment. This makes meeting financial obligations much easier and saves you money.

Consumer proposal. Once marital debt has been divided, and the amounts you are required to pay monthly seem to far outweigh your monthly income, a consumer proposal might be a smart option. A consumer proposal is an arrangement made with your creditors that not only results in one low monthly payment you can afford, it also means a reduction in overall debt based on a proposal made to creditors for partial repayment and partial forgiveness.

These are just two of the many options available if you find yourself in the difficult financial position that is dealing with divorce debt. For more information on one of these options, please contact DebtCare Canada – we have years of experience helping individuals deal with debt and divorce:  1-888-890-0888.

Dealing with Debt Part 3 – Divorce Debt in Canada

Canada has the 8th highest divorce rate in the world. Human Resources Development Canada has reported that the proportion of marriages expected to end in divorce has fluctuated between 35% and 42% in recent years. In 2008, 40.7% of marriages were expected to end in divorce before the 30th wedding anniversary. In 2008, there were 70,226 divorces in Canada or 2.11 divorces per 1,000 people. 

Divorce debt in Canada is also very common. Human Resources Development Canada also reported that in 2008, 115,789 Canadians were unable to repay their debts. Serious financial difficulties brought them to file either a consumer proposal or a bankruptcy. Individuals who were divorced or separated were more likely to file a proposal or bankruptcy.

Why is divorce debt one of the leading causes on bankruptcy in Canada? The answer is fairly simple. First, two income households will often accumulate debt based on their “household ability to pay the debt”. The challenge with this is that debt is accumulated based on two people sharing living expenses and when people separate, living expenses will double because now each party has to pay for rent or a mortgage, and living expenses separately. When household debt is present this can make it challenging to pay it.

Second, some marriages will involve one person working and one person raising the family. When divorce occurs, the party who hasn’t worked will likely have little to no income but be faced with the immediate expense of having to hire a lawyer and also live. In many cases this forces the party who has been home raising the family back into the workforce. Individuals who have been out of the workforce for a long time often have to re-enter the workforce in junior or entry level positions.

Third, sometimes one party in a marriage may carry all of the debt in his or her name. Much of the debt may have been used by the other spouse. There is nothing worse than getting a divorce and then finding yourself having to pay your spouse's debt.

Legal protections may result in the party who has the weaker financial positioning receiving support payments, being awarded the house, having the other party take responsibility for the debt, but this can take years. Also, the legal fees that compound over the course of a divorce may end up being more than the debt you owed to begin with.

So how can someone in Canada who has divorce debt keep his or her head above water without filing for bankruptcy? Fortunately, if you are in this situation there is a solution and believe me you are not alone. There are financial programs for people dealing with debt and specifically dealing with divorce debt in Canada. These programs will often enable you to make a satisfactory arrangement with your creditors and will enable you to consolidate your debt payments into a single reduced monthly payment. These programs can be found through debt consultants who specialize in divorce debt in Canada.

It is important if you are dealing with divorce debt to make responsible decisions that protect yourself and your family and also consider both your short term circumstances and long term goals.

For more information about dealing with debt or to get help with divorce debt in Canada please visit www.debtcare.ca or call 416-907-2582.

Divorce Debt Can Cause Major Financial Problems – There are Solutions for Divorce Debt

Households that include a married couple that are both working and earning a decent income, are often able to accumulate assets and debts faster than a single individual or a family in a single income household.

When marital problems surface, the stakes are high, particularly when children, assets and debt are involved. Some instances see all of the debt in the name of one spouse (in some cases even when he or she is not the primary income earner in the household). Also, when a separation occurs, assets become tied up until the terms of the separation can be determined.

When a couple separates, both spouses will experience a major change to their financial situation. Especially if the choice is made to live in separate dwellings, at this point their cost of living will increase or even double.

In more accelerated situations, couples have already divorced and a determination has been made as to “who” will be responsible for “what” debt. In these cases, dealing with the debt for a single income family can create a harsh reality and an almost impossible situation. This is particularly true if the party who is held responsible for paying most or all of the marital debt also has to make support and/or alimony payments. This is one example of a situation where a financial restructuring may be warranted.

If things get ugly, no one wins, and this presents many challenges.

If you are in the process of a separation or divorce, you don’t have to go to a divorce lawyer or attend divorce court to negotiate with your spouse. There are family law lawyers that specialize in mediation and collaborative law; they help people come to an agreement on contentious issues, without going to court.

If you are separating or divorcing, have accumulated marital debt, will not be able to pay it living independently and own a home, it will be in your best interest to find a way to work with your spouse. This could enable you to refinance joint assets such as your home, to raise proceeds to deal with debts and hire legal representation to help you and your spouse work through the separation or divorce.

One major mistake people often make when separating or divorcing, is that one or both spouses will stop paying divorce debts until it is determined “who” will owe “what”. This is the worst thing to do. Even if you are having a dispute over your debts, it is important to maintain at least the minimum monthly payments on any credit that you have signed off on.

Letting your divorce debt destroy your credit will impair your options when moving forward independently. On the other hand, if you are left with debt and have absolutely no ability to pay it, you may have to seek out other options to help you deal with your divorce debt. The solution could include a debt consolidation, financial restructuring or even financial protection.

The best thing to do if you are separating, divorcing or have divorced and are dealing with divorce debt is to contact a Financial Advisor. One who will look at all available financial scenarios to come up with a strong financial strategy so you can come out of your divorce on a sound footing. For more information about solutions to divorce debt, please visit http://www.debtcare.ca/