Making the choice to divorce is generally not something people do lightly. They are likely aware that doing so will impact multiple parts of their life. What they may not realize is just how big the impact can be on their finances.
If you are considering divorce here in New York, you should know that it can negatively affect your personal finances. Primarily, divorce can increase debt and lower your credit score. Here is what you need to know that may help you protect your finances.
How divorce raises debt
A recent survey looked at around 800 divorced or remarried people. Forty percent of them said that getting a divorce resulted in an increase in debt of over $5,000. That debt results from not just the costs of getting divorced but from sharing bills that come with the household.
As for marriages that already have debt prior to divorce, couples may divide that debt. Here in New York, an equitable distribution state, that might mean the spouse who incurred the debt is responsible for paying it, but it may not. Over 40% of survey respondents reported that they now carry shared debt from the marriage.
How divorce lowers your credit score
The same survey also found that divorce can significantly lower your credit score. Over a third of respondents said that their credit score dropped by at least 50 points after divorce. That can have a long-term impact if one tries to get a new mortgage or another kind of loan.
Experts say that the best thing you can do is keep paying your bills by the due date each month. The process of taking your name off of joint accounts won’t happen overnight, so continuing to make proper payments should help your credit score stay close to where it is. It may be tempting to stop making payments to get back at an ex, but it will hurt both parties in the long run.
Protect your finances during divorce
Money can be a source of problems in a marriage, and many couples decide that divorce is the right solution for them. If you are wondering about the financial implications of ending your marriage, an attorney can answer your questions. It could be your first step toward a brand-new future.