How to Prepare Your Finances if You Are Contemplating Divorce or Separation
A divorce or separation can cause an emotional and financial toll on both spouses. It's not uncommon for a divorce or separation to result in financial difficulties. Debts are divided and with only one income, it may become difficult for one spouse to pay debts. All too often, a divorce leads to bankruptcy because a couple is often unprepared for the financial responsibilities that arise. This can be prevented by getting your finances in order. Understand your financial position by gathering documentation of your debts, investments and bank accounts.
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Instructions
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Gather financial documents. When filing for a divorce or separation, you will be required to provide the court with information about your income, investments, retirement accounts and debts. Create a file with information including tax returns for the past several years, bank account statements, retirement account statements, investment account information and credit card statements.
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Make a record of jointly-owned property. When a divorce or legal separation is granted, you and your spouse or a court will decide how to disburse jointly-owned property. Go through your home and make a list of joint property. You and your spouse should try to reach an amicable decision regarding the division of the property.
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Make a record of your separate property. Common law states and community property states define what separate property is differently. In a common law state, the spouse who purchases the property or receives the property through a gift or inheritance owns the property. In a community property state, because money earned is community property, the purchase of property with your income means that the property is community property. Separate property, however, is property you receive as a gift or by inheritance. Create a list of your separate property.
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Keep money in a separate bank account. If you are in a community property state and you have inherited money or received it as a gift, put it in a separate bank account. If you put it in a joint-owned bank account, it could be considered community property.
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Cancel joint credit cards. When you divorce or separate, the court will divide the debt between you and your spouse. To prevent getting into further debt, cancel credit cards that list you and your spouse as owners. You don't want to be responsible for debt created by your spouse.
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Reduce expenses. A divorce is expensive. Reducing expenses will help you save money that you will likely need in the future. Ask your spouse to agree to reduce unnecessary expenses, such as housecleaning and pest control services, cable television and multiple phone lines.
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Seek legal advice. Often, for a small fee, you can consult with an attorney. Every divorce case is different; a divorce attorney can inform you of your rights and responsibilities under the laws in your state.
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Tips & Warnings
You will also want to have this information very well organized for your attorney or financial professional. You pay these people by the hour, so the less time they need to spend organizing your financial matters, the less money you will pay for this service!
References
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