4 Things You Must Do to Protect Yourself From Going Bankrupt in a Divorce

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Don’t use the legal process as a weapon to try to get even with your spouse.

When we’re hurt or betrayed, our natural reaction is to get angry. So if your marriage is ending in divorce, it’s perfectly normal to feel anger, resentment – even hatred for your spouse. And it can be very tempting to turn your divorce into a war and punish your spouse by trying to take them for all they’re worth.

But even though it might make you feel powerful and vindicated, the truth is, attempting to use the legal process as a weapon to exact revenge on your soon-to-be-ex is not a good idea – no matter how angry you may be feeling right now.

If you’re thinking of going this route, plan on bankrupting yourself financially and emotionally because you’ll spend up to $200,000 and waste two to three years of your life fighting this battle.

Money better spent buying out the house or saving for your retirement and time better spent with your children attending their soccer games and helping them with their homework.

So how can you move past the way you’re feeling so that you can avoid this terrible fate?

One way is to work with a divorce coach or a therapist.

Doing so can help you process your anger constructively and enable you to get through this painful time in your life with confidence, clarity, and dignity. And you’ll be better equipped to negotiate effectively and make smart decisions to safeguard your emotional and financial well-being.

Beware of coming to agreements with your spouse prematurely.

If divorcing spouses are able to effectively communicate, it can sometimes lead to better decision-making, quicker progress and a more cost-effective divorce.

But as much as communicating can sometimes be a positive thing, there are other times when talking – and more specifically making decisions before working with a chosen divorce professional – can do more harm than good.

In most states here in the US, the parties are encouraged to actively participate in the fair and equitable distribution of their marital assets and liabilities. But unless the parties are schooled in the financial matters pertaining to divorce, this can be a dangerous path to walk.

For example, assets and liabilities can each have different tax consequences and if not properly accounted for, a settlement that looks fair on paper may turn out to be favorable to one party and not to the other. This can happen when one party trades a checking account for a 401k, confusing pre-tax with post-tax dollars, or when there are stocks involved and neither party is aware of the cost basis of a given portfolio.

Let’s face it. There’s nothing pleasant about the divorce process so you’ll no doubt want it to be over with as quickly as possible. And it might be tempting for you and your spouse to try to make as many decisions as you can as fast as you can before you start working with your chosen divorce professional(s). But given the financial complexities of divorce, there’s a lot you “won’t know you don’t know” so it’s important to take the time to do the proper discovery before you do any deciding.

Say you and your spouse decide on your own how you will divide an asset… You’re both satisfied with what you’ve agreed to and both think it’s fair. Then, you share this information with your mediator or attorneys and after a thorough discussion and review, it turns out the settlement you both came up with is actually unfair to you.

This is a very dangerous situation.

Think about it. Your spouse is happy with the result and is willing to fight for what was previously agreed to. While you feel like you got the short end of the stick and now want to renegotiate.

At this point, any trust that remained between you and your spouse will be gone. Your spouse believed you had a deal and now you’re going back on your word while you feel like your spouse was trying to put one over on you and you think they’re not negotiating in good faith.

So off to battle you’ll go along with all your hard-earned cash…

To avoid this catastrophic mistake, wait for your chosen professional to give you all the facts and help you understand what a fair and equitable settlement really looks like before you make agreements with your spouse.

Don’t have unrealistic expectations of what you can get/what you’ll pay. Take time to learn the facts/realities.

The Internet is not a reliable source of information when it comes to calculating alimony or child support.

On one hand, there are the blogs written by already divorced people who share their stories about how much they got or how much they had to pay. Given that anyone can publish a blog, while some of their stories may be true, do you really want to trust your own financial future to someone who just has a need to vent and has no formal education in the financial matters surrounding divorce? And chances are, your settlement won’t look anything like theirs anyway, because no two divorces are ever the same.

Next are the notorious child support and alimony calculators you find on the Internet. While it’s true that all states are required to have a Child Support Guideline, they vary wildly from state-to-state. And they don’t include all the expenses required for raising a child. So the number an Internet-based child support calculator churns out won’t be accurate and a lot will be left out.

As for alimony calculators, most states don’t have a formula. That’s because in most states, alimony is determined by a complex series of factors that are taken into account to arrive at an amount. And not one of them is truly mathematical in nature.

But here’s where it gets really tricky…

Some people go online and then fight to the bitter end because they believe they only need to pay or are entitled to receive what “Suzie’s Blog” or the “free alimony calculator” told them. Now both spouses are at odds and their divorce battle drags on for years and costs a fortune.

Your best bet is to stay off the Internet and instead let a qualified professional give you some perspective and help you come to a fair and realistic settlement.

Choose your divorce professional carefully.

There’s a good chance your divorce is making you feel completely out of control and with good reason.

You have no idea what you’re entitled to for alimony, you’re worried your kids won’t get enough child support and as far as family finances go, you’re in the dark as your spouse paid all the bills and managed the investments. So you’re willing to take a back seat and put your financial future squarely in the hands of an attorney.

But is this really a good idea?

Attorneys are zealous advocates. It’s their job to fight for their client, and their client alone. So it goes without saying that your attorney is going to do whatever it takes to make sure you get the more favorable deal. While at the same time, your spouse’s attorney is going to do exactly the same and will fight to the bitter end to make sure their client gets the better deal.

Can you see how this will be a problem?

Because the more you fight, the more you’ll spend on attorney fees and the more you spend on attorney fees, the less money there will be to fight over.

Instead of hiring lawyers as your first step, try divorce mediation. In mediation, a trained neutral third party well-versed in the laws and financial matters of divorce will help you and your spouse negotiate directly with the goal of reaching a settlement you both find fair.

And if for some reason mediation isn’t a viable option, consider the collaborative divorce process whereby two attorneys agree to use cooperative methods instead of combative techniques to help you and your spouse settle your divorce out of court.

Both of these divorce methods are less expensive and can help you and your spouse avoid financially ruinous litigation.

Joe and Cheryl Dillon are co-founders of Equitable Mediation, a divorce mediation team that specializes in helping New Jersey and Illinois-based couples divorce peacefully, cost-effectively and fairly – without lawyers.

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