Divorce usually means lots of talking about finances. It is the core of the process – how to share property, then, matters of alimony or child support. However, there is another point which seems to be omitted in our “divorce calculations”. It is financing the divorce. It costs money, sometimes the expense is huge.
Have you already thought how you are going to pay for the attorney or mediator and all the fees you will be obliged to pay? If you are a millionaire you probably do not have much to worry about, but if your salary is enough only to survive a month, you should think it thoroughly and prepare yourself.
What are the costs actually? You have three options: a cheap “DIY divorce” option – up to $1,000, a middle option – from $3,000 to $15,000 and an expensive option – more than $30,000. Now, answer these questions to assess how much it can cost in your personal situation:
- Will it be a contested or uncontested divorce? Uncontested divorces – meaning coming to an agreement without a trial – are cheaper. Contested divorces are usually longer which makes more money for attorneys.
- Are the most significant issues settled? Child custody, visitation, sharing property, support – it is important to know what main sticking points are, which will help save money and time.
- What are the costs of attorney in your area? The prices vary in different locations, so you must check.
- Will you need attorneys (more expensive version)? Maybe you can work with a mediator (less expensive version)?
Traditional financing options
The easiest way of financing divorce is just paying in cash. If you have a savings account and you can pay all the fees that is great. Maybe you have a checking account with enough money to cover the costs?
Apart from this, you have a credit card option. Unfortunately, paying with a credit card makes the divorce more expensive, because of high interest rates. Generally, it is recommendable to pay down your credit card debts before the divorce. It is good for your credit score, since even if your ex will have to pay the debt, he or she can miss payments and this will affect your score.
You can use also your retirement account. It is not recommendable, because the money for retirement should remain the money for retirement, but sometimes there are no other ways. The disadvantage of this method of financing is – apart from taking money intended strictly for retirement – obligation to pay tax at a regular rate and 10% penalty for taking the IRA or 401k money before you are 59.
There is a way to omit the penalty, though. If according to your divorce agreement, you owe your spouse some part of your retirement money, you will be allowed to transfer money to an “alternative payee” before you reach the age of 59 and, simultaneously, you will avoid the penalty.
Non-traditional financing options
If you have such a possibility, you may ask your family or friends for a loan. It is much cheaper option than going to a bank.
Moreover, there is an option available for wealthier families – companies which finance high-cost divorces. It is a new business area which is found very useful in the case of wives divorcing high-earning husbands. It is usually possible for couples with more than $4 million of marital assets.
Wevorce is another option for couples looking for low-cost divorce options. It offers clear and predetermined costs so you know what to expect. And there is no hourly billing.
And your last resort is… to sell something valuable. It can be a car or some jewelry, like the engagement ring. Check WP Diamonds which will help you find a buyer without unnecessary stress and complications.
Plan you divorce financing in advance. It is stressful enough, do not make it more complicated than it is.