How Will Divorce Affect Your Finances?

There’s no one-size-fits-all answer to this question. Your post-divorce financial situation could vary wildly depending on the terms of your divorce; whether children are involved; child support and alimony payments; and how your assets and debts were divided.

Marriage is generally designed to make it possible for people to pool resources and build their wealth. Divorce usually takes a bite out of that accumulated wealth for both sides. According to some statistics, divorcing couples need to increase their base income 30% to keep up the same standard of living they had while together.

Both men and women can suffer financially in a divorce—but it’s women who usually take the brunt. According to a recent GAO study, women’s household income drops 41% after getting divorced.

There are a variety of factors contributing to that, including:

• Mothers are more likely to take time out of the workforce to care for children. This makes it hard to transition back to work after divorce.
• Women frequently get the larger share of child custody, putting more of the financial burden of raising children on their shoulders.
• Approximately one in three women loses the home, and one in four loses health insurance, in the aftermath of divorce.

Men’s finances take a hit as well – the average drop in household income is about half that of women.

One of the biggest factors that contribute to men’s financial issues after divorce include having wages garnished for alimony and child support. As men are more likely to be the higher-earning spouse and not to be awarded primary custody, they’re more likely to have to pay both.

While the amount of payment can vary widely, according to Mint.com, the spouse paying alimony and child support may have to pay as much as half their income to the non-paying spouse, for a significant number of years.

However, there are other factors that contribute to major financial pitfalls for both men and women. These include:

Legal Fees

Each side will need their own lawyer. But the expenses outside of that also add up: for court fees, legal filing fees, the cost of document copying and dissemination, and payments to expert witnesses, appraisers, financial analysts, and child therapists.

A recent study by Lawyers.com broke down the financial realities more carefully for couples in Georgia. Here are the highlights:

• The average Georgia divorce costs $14,700, including $11,600 in attorney’s costs.
• The most expensive divorces generally involve minor children, alimony payment disputes, and complex properties and assets to be divided.
• High-net-worth couples tend to have more complex divorces and more entanglements—so their divorces cost more.
• Couples who settle out of court pay significantly less than those who go to trial.

Tax Implications

You may not be aware of the tax implications of your divorce until after the terms are decided and the dust settles.

The way divorce affects your taxes depends on how you divide assets and debts, whether you keep the house or sell it, who pays the mortgage until then, and a wide range of other factors.  It’s crucial to keep this in mind as you negotiate your settlement, so you don’t get any nasty tax surprises down the road.

Your Credit Standing

Many people getting divorced don’t realize how their divorce will affect their credit.

Officially, filing for divorce won’t directly change your credit score. However, the financial upheaval that comes along with divorce absolutely can impact your credit. For instance, if you’re late on a payment because of changing financial circumstances, or if there’s confusion or disagreement over who is responsible for paying which bills.

In addition, if you co-signed on a spouse’s loan when you were married, took out a loan together, or are listed as a joint owner of an account, those may still appear on your credit after divorce and your spouse’s late payments may hurt your credit.

Your Spouse’s Debts

In Georgia, debts accumulated during marriage fall under a standard of “equitable division.” That means if you split, the debts you both accumulated during marriage are divided, although not always 50/50.

Say your spouse took out a student loan in their name alone during your marriage or racked up thousands of dollars in credit card debt. Even if your name isn’t on the loan or credit card, you may still be responsible for some of it when you divorce.

There are some situations where you may not be saddled with having to pay part of your spouse’s debt upon divorce. For instance, if your spouse took out the loan or racked up the debt before you married or if you both agree in a settlement that your spouse will take on 100% of their own debt.

But this isn’t guaranteed, and it can come as a shock to divorcing couples in Georgia.

Choosing the Right Lawyer

Your choice of which lawyer to work with can profoundly affect your finances. Depending on whether the case gets drawn out or settled quickly – and how effective they are at arguing for your rights – the wrong representation often proves to be a lot more expensive.

Work with a Family Lawyer Who Can Protect Your Finances

If you’re going through a divorce, we can help. Call us at (770) 479-1500 for a confidential consultation today.