4 Steps to Handle Overwhelming Debt From Divorce

October 20, 2020

In Kelly Ann Smith’s Article, How to Untangle Joint Credit Card Debt in Divorce, she does a great job of identifying the fundamentals of how debt is divided in a divorce.  In a nutshell, the divorce judge will assign who is responsible to pay for which balances.  The tough part is that the way that the divorce judge carves up the pie does not change who is signed to the loans.  So if the divorce judge says, for example, that former husband is supposed to pay former wife’s Amex card, but that doesn’t happen, then Amex could still sue and ultimately collect on wife.  While there could be remedies, it doesn’t make for an easy situation.  In our example, former wife would have to either file a “cross claim” against former husband when she is sued by Amex, or may have to take him back to the divorce judge.

Financial strain is common after a divorce.  The separated parties go from two sets of income and one household to separated household, plus the added expenses from the separation itself (legal fees, alimony, child support, etc).  So what are some ways to deal with the strains of debt?

1. Step 1:  Make a Plan (I know, plans are boring)

OK, yes, you have to make a plan first – even before you change your budget!  I know what you are thinking – dealing with a few changes to the budget is easy and clear and you can start today, but dealing with a long term plan is draining and takes time.  But its the most important thing you can do out of the gate.  Why might you ask?  For those of you in more difficult debt overwhelm, you will want to evaluate your bankruptcy options before you start making changes to your budget.  Bankruptcy can often be the fastest and cheapest way out of significant debt.  BUT you may lose qualification for different options if you budget gets better.  I know its backwards, but we are stuck with the system we have, so use it!

Getting your information together is particularly important in a separation because some divorce-related obligations may or may not be dischargeable, and it can depend on which type of bankruptcy you file.

So when is the right to time make the plan?  While each situation is different, it can be helpful to get your plan in order even in the early stages of separating.  I’ve seen many couple successfully eliminate their debt before the divorce is final, and it allows them to move on in their new lives with that much less of a web to untangle.

2. Step 2:  Take a Hard Look at Your New Budget

This is a topic that sounds obvious, but I’m going to ask you to take this 2 steps beyond your comfort level.  You may have to make some significant changes to your lifestyle to get your budget on an even keel.  What can you do to reduce you’re living environment cost?  Can you take on roommates or live somewhere more affordable? Can you trade in your vehicle for a lower payment (bonus points if you can pay cash)?  Do you have an opportunity to moonlight (also known as a “side-hustle” to my millennial readers).

3.  Step 3: Execute

Whether your plan to get the debt is order is a simple payment plan, working with someone to consolidate your debt, bankruptcy, or something else, its time to make it happen.  As with a great many things in this world, rarely is any option a true magic wand; they will all come with ups and downs.  Be patient and stay the course.

4.  Step 4:  Get Your Debt Health Back in Order

So real talk, it can take a few months or a few years to get your debt in order from a prior marriage.  Now its time to absorb what you have learned.  Debt can be a useful tool, but its important to treat it with respect.  Some debt is actually healthy for a good credit score.  Get your debt health back in order for opportunities in the future.


Do you have questions about your debt from separation.  We are happy to help with your plan in a complimentary half hour consultation.  You can schedule a meeting online today with an experienced attorney.




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About the Author

Ziegler Diamond Law: Debt Fighters, provides effective legal services to consumers in Clearwater, Florida, and throughout the Tampa Bay area who are facing home foreclosure, unmanageable debts, debt collector harassment, or other debt-related problems.