If you are currently thinking about getting a divorce, there's no doubt that one of the things that concerns you the most is your finances. Your fears are not unfounded. As many as 1 in 6 Canadians will file bankruptcy at some point. According to Starting Over, one of the most common reasons for filing bankruptcy is divorce or breakdown of a marriage. The most important thing you can do to avoid needing to file for bankruptcy after your divorce is to plan ahead before you begin the process of getting a divorce.
Get copies & study every document for property & finances
Since the marital assets will be distributed in a divorce and that distribution could affect your financial status after the divorce, you'll need to get a good idea of what your current financial status really is. Get copies of every document regarding your marital property, finances and debt. Study them. Go through each monthly statement from your creditors and debtors. Resolve any discrepancies you find.
Once you have a good picture of what your marital finances and assets are, you'll be able to get a better understanding of what you'll need to survive financially as a divorced person. Your divorce lawyer can give you a good idea of how the courts will distribute the marital assets and debts.
Helpful tip: If you do find discrepancies, such as a savings account that seems to be missing money, do not ask your spouse about it. Instead, speak with your specialist in divorce law in Calgary for options on what to do. Sometimes, people try to hide money from their spouse, especially when they feel divorce is looming.
Meet with a financial advisor to create a budget
Take copies of all the financial records with you to meet a financial advisor. You'll also want to have the rough estimate from your lawyer of what your split from the divorce will be… whether that means you'll be on the paying or receiving end of the finances. You'll also need to have your current income statements and a list of your current individual bills.
The financial advisor may need a few minutes to look over all the documentation. Then, he or she can help you set up a budget for your post-divorce life based on the information you gave. Make sure the advisor includes a savings plan and an emergency fund in the budget. Of course, having a budget means nothing if you don't stick to it.
Establish & start building individual credit
After your divorce, you may find it difficult to get a vehicle loan, mortgage, or credit cards if your credit is non-existent as a single person. Take a look at all the statements and financial records. If most or all of them are joint accounts, you'll need to establish and build credit for yourself as a single person. Open a credit card for yourself, but do not include your spouse on it.
Do not overspend with this credit card. You will open it to help start building your credit rating as an individual person. Make purchases with the card, but be sure to pay the balance off each month so you don't carry a debit on the card. The last thing you'll need is to start your new life with a debt, no matter how small.
Downsize & stay under the consumer debt ratio
Downsize your home, your vehicle, and your lifestyle. Don't create so much debt that you will be unable to pay it back. According to Huffington Post, consumer debt in Canada is as high as 163.3%. This means that, on average, Canadians owe $1.63 for every $1 of their disposable income. When more is owed than is brought in, it's extremely difficult to keep up with all your bills and payments, which may be a huge contributing factor to the fact you learned in the first paragraph: 1 out of every 6 Canadians file for bankruptcy.
Divorce is one of the leading causes of bankruptcy. However, by being prepared, you may be able to keep your head above water and avoid filing for bankruptcy after your divorce.