Financing the Cost of Your Divorce

 Posted on January 19, 2018 in Divorce and Finances

Divorce is an expensive process. Beyond what you may give up in the divorce settlement, you are responsible for paying attorney and court fees. You may need an alternative form of financing if your available income cannot pay for your legal fees. Establishing credit or liquidating assets involves its own risks. You must carefully consider the consequences of each form of financing before making your decision.

Bank Loans and Credit Cards

If you have a good credit rating, you can pay your legal fees by taking out a loan or charging it to a credit card. Naturally, you will pay more over time because of interest. However, you must also consider what level of payments you will be able to afford after your divorce. You, and not your spouse, are responsible for the debt you create after you file for divorce.

Personal Loans

You can avoid traditional lines of credit by asking a family member or friend to lend you the money you need. Such loans can be an informal gift or given with a contract establishing repayment expectations. While getting money from friends and family can be simpler than obtaining a bank loan, there are consequences:

• Money given as a gift is taxable income;
• Your friend or family member now has a personal stake in your divorce; and
• Failing to pay back the loan may strain your relationship.

Liquidating Assets

Selling valuable properties for cash can give you an immediate means of paying your legal fees. Before you sell an item during your divorce, you must be sure that it is a non-marital property. Most marital assets are frozen until they are divided during the divorce negotiations. After your divorce is completed, you can assess whether there are any luxury items you are willing to sell to help repay your debts.

Retirement Withdrawal

Taking money out of your retirement plan to pay for your divorce is highly discouraged:

• You will be penalized for making an early withdrawal if you are younger than 59;
• The money you take out is taxable income; and
• The value of the money would have increased if it had stayed in the retirement account and gained interest.

Unfortunately, you may have little recourse if you cannot obtain a loan and your retirement account is your most valuable asset.

Paying for Divorce

Before you take out a loan or sell property, you should talk with your divorce attorney about financing options. You may be able to obtain financial relief from your spouse if he or she has a greater income. A Kane County divorce attorney at Goostree Law Group can discuss ways to make your divorce more affordable. To schedule a free consultation, call 630-584-4800.

Source:

https://www.wevorce.com/blog/how-to-finance-your-divorce/