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The Financial Consequences of Getting Divorced

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The title of this could easily also have been, the effects of ending a relationship, or when partners split up. Either way, the financial implications and consequences of getting divorced or ending a relationship can be many.

It is also a time of high emotions, it is like a death in the family. The death of the relationship.

Holidays will change as there is no longer the blended families of each spouse or partner. If children are involved it can be even more difficult.

With all these emotional ties and things to contend with, money and finances may seem secondary, however, they do need to be considered, and looked at closely when ending a relationship. This is especially true if you have joint assets and joint debts.

There is much to look at and work out.

However, if a relationship is ending and there are no children involved, you both have no jointly held assets or accounts whatsoever, it is possible to just walk away from each other and move on.

This would be rare and the exception, and even then there could be issues such as pensions, and other individual investments.

Unfortunately, the majority of divorces and relationship splits are not that easy, and are going to involve some financial ties, which can cause some problems. They don’t need to cause issues or problems, but due to the emotionally charged situation, both the divorce and having financial together, it can be a recipe for some serious consequences.


One of the first things that needs to be looked at when a relationship breaks down, and there is no set order of things to look at, is any assets the couple or household may have.

These assets can be property, investments, savings, anything of value.

In some instances, one spouse or partner may have already owned the asset prior to the marriage or relationship. This does not always mean that person gets to keep what was originally their asset.

In the example of partner A moving into partner B’s house, and then they begin sharing the bills and costs, such as the mortgage and maintenance costs, partner A may feel they have established a “beneficial interest” in the property.

It can be complicated in trying to show this interest, and documentation is going to be crucial. It can also cause some serious resentment between the two parties.

One thing that has to mentioned when discussing financial consequences of relationships breaking up is hiding assets, or one party going out and spending the savings, or running up huge bills and debts prior to the divorce.

Some spouses/partners may try to spend or hide money in their businesses.

Family lawyer at Irwin Mitchell, Alison Hawes said, “Sometimes we see a suddenly see a lot of money going into the business to cover rather vague expenses. Or it could be that normal dividend payments are not made. A lawyer will certainly rake over the report and accounts carefully if they are concerned about such issues.”

“However, if this is a viable trading company, with other owners and creditors that has been running for years this won’t be included in a divorce settlement. Although of course any share you own in it could be taken into consideration.”

The best advice here when looking at the breakdown of a relationship, is the same as I give when someone asks me about going bankrupt:

* Do not make any large purchases.

* Do not transfer money to other accounts.

* Do not try to sell any assets.

* Do not open any new accounts.

You don’t want it to be seen you are less than transparent, as this can cause for further and a deeper investigation.

dealing-with-partners-debts-shutterstockJoint Accounts and Debts

Here’s an area of divorce and ending a relationship that confuses many people. Especially regarding jointly held debts.

It is also an area of divorce that can get people in real financial difficulty and cause them to face insolvency.

The main thing you need to keep in mind is that any jointly held debt, or debt that one or the other has guaranteed, you both are equally responsible/liable for.

It is not a 50/50 venture, where you each are only responsible for half.

If one person doesn’t pay any payments on a jointly held or guaranteed debt, the lender is going to seek payment from the other person.

Even in divorce.

If an account is in just one person’s name, then they are the one responsible for that account. Just getting married does not make the other spouse liable for the account.

Even if a divorce decree states on party is to pay a debt, the original loan agreement supercedes the divorce decree.

A worse case scenario is that in the divorce one spouse agrees to pay some debts, then over time they fail to do this. They may even go bankrupt.

The lender(s) then approach the other spouse for payment.

If the other spouse has gone bankrupt, the entire responsibility of the debts falls on the “financially injured spouse”. In some instances, this may cause that person to also need to go bankrupt.

This is where is gets not just ugly, but financially ugly.

That is why anyone with joint accounts with their ex, need to stay on top of the accounts, even if they are not the ones paying the accounts. You need to know what is happening and if the bills and accounts are being paid.

shutterstock_344303603Maintaining Two Households

This is an area/expense, that is not thought of initially when couples split up; you both now have to support your own household.

You each have rent/mortgage, electricity, gas, council tax, etc, and you may no longer have two incomes to support this, if you were both working.

This can be quite an eye opener and a lifestyle changer.

And for some, they may not be able to move out, or move on.

shutterstock_141473581Couples Divorcing and Living Together: Not all couples can afford to split up or divorce, and maintain two separate households. So they stay living together.

A charity that specialises in relationship counselling, Relate, found that more and more of the clients they help each year cannot afford to move out when they get divorced. This is especially true of those households with children.

And these are not low income households.

The Chief Executive of Relate, Ruth Sutherland said, “When we talk about Relate’s clients, we are not talking about people on low incomes. We’re talking about people in employment, on average to above-average incomes.”

“These are people who could previously afford to move away from each other when their relationship broke down,” she added. “But now, they are stretched just to pay their mortgage on top of the rising cost of living. When their relationship breaks down, they find they can’t afford two mortgages, on top of the cost of running two homes.”  

She added, “To pay for the increased childcare demands that come with being a single parent has become a pipe dream for many people, even those in well-paid jobs.”

“I would not be surprised at all to see the problem creeping up the salary band,” she said. “This era of austerity we’re in is not like other hard times we have lived through.”

“In the past, we’ve had a dip and then recovery, but now we’re in unknown territory about the length of time people are going to have to cope with debt, job insecurity, pressure from work and the mounting cost of childcare.”

“The only thing we know is that people are going to have to cope with these problems for longer than they would ever have done so before.”

“It’s vital for the future of our children, and thus the future health of our nation, that estranged parents manage their separation well.”

“Children learn about relationships at home. If they see their parents undermining each other, arguing and being vindictive, then that’s the foundation on which they will build their own relationships. It’s not only the adults who, if stuck in a toxic situation, are going to be damaged.”

Another odd and sad fact pointed out by Relate was that may of the clients that went to the charity for help, could not afford to finish the sessions, or in some instances even begin them.

This is a huge financial consequence of divorce or ending a long-term relationship.


Child Maintenance

If there are children involved in a divorce or relationship split scenario, there also is the issue of child maintenance.

Child maintenance is regular payments from one parent to the other, who usually has the day-to-day care of the child or children.

These payments can be agreed upon by both parents, or if no agreement can be made, the courts can be involved.

The parent that is responsible for child maintenance needs to keep in mind that this payment is a priority bill. They also need to keep in mind any maintenance arrears, cannot be included in any debt management schemes, IVA’s or bankruptcy.

For the parent who is required to pay child maintenance, this can be an additional monthly expense that needs to be factored into their budget and may affect their lifestyle.

divorces--zExpensive Divorces

In discussing the financial ramifications of divorce, it would only seem fair to mention some of the high profile and more expensive divorces we have heard about.

Alex Wildenstein: After his wife sued him on the grounds of adultery, it was said she received $2.5 billion or £1.5 billion. Wow!

Mel Gibson: When the actor divorced his wife, she received $425 million.

Neil Diamond: The singer/songwriter’s divorce cost him a cool $150 million.

Tiger Woods: The famous golfer’s divorce cost around $100 million. A hole in one.

Madonna: The material girl’s divorce from Guy Ritchie was estimated to cost $76 to $92 million.   Strike a pose.

Sir Paul McCartney: Sir Paul’s divorce from Heather Mills cost him $48.6 million. No money cannot buy love.

,The title of this could easily also have been, the effects of ending a relationship, or when partners split up. Either way, the financial implications and consequences of getting divorced or ending a

This article by Jon Emge was syndicated by the Personal Finance Syndication Network.

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