Divorce and a large amount of credit card debt often go hand in hand. Often the people involved are not prepared for the effect a divorce will have on them financially.
Credit Card Debt Increases in Divorce
There are two major factors in divorce that helps to increase the credit card debt considerably. The first is that the divorce process is expensive. Even if a divorce is amicable, you will require three or four hours of a lawyer’s time. That will cost approximately $500 per hour, so it does not take long to get expensive. If there is a fight about assets or child custody, the time spent will be greater and the cost will be more. The second factor is that the lawyer will have to be paid on an ongoing basis. You may use credit to pay these bills or if you pay cash, you may use credit for the household expenses unless you have the money for the divorce saved. Often the monthly credit used is greater than the income, or the income set aside to pay debts, so the credit card debt increases and will continue to rise until the divorce is finalized.
Credit Card Debt Difficult to Pay After Divorce
When you separate and move on to a divorce, there will be less income to pay the monthly expenses. That is because there will be one less household income to cover the monthly bills. More money will be needed to pay the necessities which means there is less to pay the credit card debt. Now instead of paying a large amount of principal, there is little or no money to pay the principal, so the debt continues to grow.
Solutions to Credit Card Debt from a Divorce
The first solution people think of when they cannot repay the credit card debt is bankruptcy. Depending on the household income, that may be the solution for you.
However, when assets such as the matrimonial home, education plans and retirement savings plans are involved, and if the income exceeds the government guidelines, bankruptcy can be very expensive and impossible for some people. There is another solution: a consumer proposal.
Because the consumer proposal can extend to as long as five years, the payments per month can be less per month and more affordable. Also you will repay a portion of the debt which often helps to deal with negative feelings in a very difficult time. Finally, creditors prefer to make a recovery compared to little or no recovery in a bankruptcy.
If a divorce has given you a new start in your family life, a consumer proposal can give you a fresh financial start from credit card debt. Contact a consumer proposal administrator today to find out how.