In today’s economy there are many reasons that individuals ultimately decide to file for bankruptcy. One of the longstanding reasons is divorce. According to Candace Bahr, co-founder of the nonprofit Women’s Institute for Financial Education, it is important to remember that after a divorce one’s income and assets are likely half of what they were when the marriage was still intact.
Immediately after divorce is a good time to reevaluate one’s finances and make adjustments as necessary. After checking your credit report and making sure you no longer share any accounts with your former spouse, it is important to determine what you can actually afford in you new life, and if necessary, modify your spending habits. Should cutting back on spending fail to sufficiently address the situation, bankruptcy may be the right course of action.
In addition to temporarily lowering your credit score, filing for bankruptcy will also be on your credit report for a minimum of seven years. For this reason, if bankruptcy is in your financial future, it is important to file sooner rather than later. The sooner the papers are filed, the sooner you will be able to begin to rebuild your credit.
Though concerns regarding lower credit after filing for bankruptcy are legitimate, the fallout may not be as bad as you think. There are multiple ways to begin to rebuild credit. After the bankruptcy is finalized, some people recommend opening two new credit cards, using them, and paying the entire balance each month. In addition, some creditors find recent filers appealing because it is not possible to file for bankruptcy again for eight years. This means that recent filers are liable for any debt that is accrued.
If your divorce is a catalyst for declaring bankruptcy, focus on the positive. The fresh start that bankruptcy is designed to provide will truly allow you to start the next part of your life with a clean slate.
U.S. News & World Report: “Keep Your Ex-Spouse from Ruining Your Credit,” Kimberly Palmer, Aug. 16, 2011