Getting out of debt after divorce
Going through a divorce is one of the most stressful and painful experiences a person will ever go through, but afterwards many people are surprised by the amount of debt that they collected by going through the process. Paying for a lawyer, setting up a new household, and taking on a share of the debt from the marriage can add up quickly. In fact, divorce is one of the top three reasons that people cite for choosing to go through a bankruptcy.
Getting out of debt involves planning.
Fortunately, there are ways to avoid going through bankruptcy, even if a person has a lot of debt. The first step is to come up with a plan. Setting up a new household after a divorce means that your income and bills have radically changed, so if you haven’t already done so, create a new household budget. Be sure to include child support, alimony, and income from your job. In addition, make sure that you list all of the bills you have to pay each month.
Setting the plan in motion.
Once you have a budget, it’s possible to determine your best debt solution. If your monthly bills are higher than your income, or if they take up so much of your income that you can’t buy groceries, it’s time to look at your debt restructuring options. A debt consolidation company, for example, can renegotiate your debt with your creditors. In many cases, they can lower your interest rate and stretch out payments over a longer period of time. That will give you lower payments every month, freeing up cash to pay your other bills. As you get on a more solid financial footing, you can make extra payments towards these debts and still get everything paid off when you want.
Accelerating your path to debt freedom.
If you have extra money left over, now is the time to come up with a plan to get your debt paid off as soon as possible. One good strategy is to take half of the “extra” money and dedicate it towards paying off the debt with the highest interest rate while making minimum payments on everything else. This will help to eliminate a lot of credit card debt quickly.
To speed up the payment process even more, consider going into debt counseling. A good counselor can help you to get lower interest rates on your loans, and work out a plan to pay off everything as fast as possible.