Divorce and Other Ways You Can End Up in Debt

Credit is a legitimate means to acquire items you need when you do not have the cash to purchase them outright. For instance, most people buy homes and cars on credit. These big-ticket items are considered to be good investments. A home will build equity and a reliable car gets you to work on time. Credit cards can be a great way to earn rewards like airline miles, but you can get into trouble if they are not used responsibly.

Debt doesn’t just happen. It usually takes time to get into debt, and it will take time to get out. Our Orlando divorce attorney explains that aside from the usual credit cards, loans and mortgages, the number one way that people find themselves in sudden debt is divorce. There are several reasons that divorce is so difficult financially. Are there steps to take that can prevent divorce from ruining both parties financially?

The Reality of Debt

The reality of debt is that it can easily be mismanaged. Once it begins to snowball out of control, it can be difficult to rein it in. If you are late with a credit card payment, they can raise your rate, and other credit card companies can follow suit if they believe your risk profile has increased. Couples who separate must be extra cautious about working together to manage their debt.

The financial costs of divorce can be mitigated if done right. When anger overrides common sense and fairness, couples can find themselves paying double living expenses. Suddenly, a couple with two incomes is now each paying for a home, utilities, and everything else a family needs. The living expenses of a double-income family living separately may leave no room to pay credit card debt, car payments, or adequate insurance. When you add in the costs of two attorneys, the couple may have difficulty paying for basic food and shelter, let alone making regular payments on their mutual debt. Coming to a preliminary agreement early can save both parties a lot of trouble.

Other Causes of Debt

Another issue that puts many people in trouble with debt is medical issues. Any American family can find themselves financially devastated by a medical emergency. You can have manageable debt, yet one accident or injury can leave you unable to work or pay your bills on time. Also, recent events have shown us that sudden job loss can be a devastating reality especially when you have debt. Once you have exhausted your savings and unemployment benefits, there are not a lot of options for dealing with debt. You can find yourself with debt that can only be solved by bankruptcy.

Entrepreneurship is an admirable goal. Unfortunately, many businesses fail and leave the owner in a pile of debt. This can be managed by forming the right business structure from the beginning and getting expert advice before you go into business.

Many times in life things don’t work out the way they are planned. This is an excellent reason to manage your debt wisely. You should always be aware of how much debt you have, and make sure it is manageable in most circumstances. We cannot prepare for every possibility, but we can prepare for changes by saving and insuring against some possibilities.

This article was written by Georgina Clatworthy, a legal writer and blog editor.  She contributes this article for Katz and Phillips, an Orlando divorce attorney law group.  Agreeing to the distribution of assets during a divorce can be difficult and, as experienced divorce lawyers, they understand the need to ensure a fair and amicable agreement is reached by both parties.