Divorce can be one of the more emotionally painful events you'll experience in a lifetime. But the financial implications of a divorce can be just as painful before it's all said and done. And the consequences can be long-lasting for everyone involved.
Cost
Every divorce is different. An uncontested divorce, in which the parties agree on all the terms of the split, can cost significantly less than a contested divorce--sometimes as little as a few hundred dollars. The complexity of a contested divorce can vary greatly, making the cost potentially astronomical. It's not unheard of for a bitterly-contested divorce to cost tens of thousands of dollars to finalize. Attorneys' fees and court costs are normally what make the cost of divorcing increase significantly.
Date of Separation
According to DivorceSource.com, this date can affect your financial situation dramatically. From the date of separation, you and your ex are in "financial limbo," and much is at stake. It's possible that you could still be held responsible for debts incurred by your ex, the value of retirement plans and property can increase or decrease, and so on. Before the divorce is final, these are the types of things that can affect your financial situation for better or worse. And keep in mind that in some states, it could be years before your divorce is finalized.
Considerations
The state of the overall economy can have a drastic effect on your financial standing after a divorce. For example, the divorce rate fell in 2008 as a result of a bad economy, job losses, foreclosures and eroding retirement accounts, according to the National Marriage Project of the University of Virginia, because people thought it was more prudent to stay together than to divorce and be ruined financially. The housing market crash has resulted in foreclosures and short sales, which damage credit ratings and leave people owing lots of money to banks and mortgage companies, making moving on very difficult.
Marital Debt
Any debts that were accumulated during the marriage, such as credit card debts and mortgages, are normally divided up equally at the time the divorce is finalized. Depending on the laws in your state, a judge could make one spouse assume a debt that is in both spouses' name. If the debt goes unpaid, it can have disastrous effects on credit scores.
Alimony and Child Support
There are a great many factors that determine if alimony and/or child support have to be paid by one spouse and also how much is owed, including income disparity, potential for future income and custody arrangements. If one spouse makes significantly more money than the other and/or has much greater access to the children, the result can be massive alimony and/or support payments that make life extremely difficult for the payer.
Taxes
There are tax benefits to filing jointly, especially if children are involved. After a divorce is finalized, your filing status will change, and if you have children, you must work out with your ex-spouse who will claim which children and when. Also, there are tax implications on things such as property acquired as part of a settlement with your ex. DivorceSource.com recommends speaking with an accountant or tax attorney if you have a lot of assets or are confused about the tax liabilities.
Moving
When a divorce occurs, one or both parties have to find a new place to live. You have to start paying rent or a mortgage on your own, and if you own a home with your spouse, the mortgage statement will keep coming every month. There are laws on the books that can make the spouse that moved out partially responsible for a mortgage even if he doesn't reside in the family home anymore. So it's possible to be paying rent and a partial mortgage at the same time after a separation.
