5 Financial Risks Women Face During and After a Divorce

By Lyle Solomon, Principal Attorney

Divorce is a difficult process regardless of the circumstances. People have to go through the emotional pain of abandoning the dream of a happy marriage. There’s also the difficulty of telling your children and dealing with the reactions of friends and family. 

Divorce can pose many financial risks women face during and after a divorce.  Several factors contribute to this, but they all lead to the same outcome: it is harder for women to afford a divorce and get back on their feet once the divorce has been finalized.

Here are 5 Financial Risks Women Face During and After a Divorce:

Supporting their Finances

Full-time female workers in the United States are still paid only 83 cents for every dollar men earn. The consequences of this disparity affect women for the rest of their lives. Women are also more likely than men to stop working outside the home to take care of their children, which means that they lose their financial independence and workplace skills and have a long career break in their résumé.

All of this results in lower household income for women after divorce. To avoid a crisis like this as you contemplate divorce:

•    Start putting away money into a private bank account to help you get through the divorce.
•    When people get divorced, they often have to split up joint accounts. This can have a big impact on their credit history and credit scores. To improve your credit score, apply for a credit card in your name, make a few purchases and pay back the credit card bills in time.
•  Talk to an attorney about your joint credit cards with your spouse.
• Start an emergency fund; even if it is a tiny amount, you must have at least a financial cushion to fall back upon.
• You should also remove your name from joint bills and utilities, which can take longer than you think.

Child Support and Alimony

Another factor contributing to the burden of divorce on women is that when parents divorce, women frequently become the primary caregivers. According to a 2013 U.S. Census Bureau report, only one out of six custodial parents (17.5%) were fathers. It means most women take custody of their children after a divorce, impacting their post-divorce budget. Mothers are supposed to receive alimony and child support, but according to the U.S. Census Bureau, only 45.6% received full payments in 2013. The loss of this income can be devastating financially.

Even if you do not get custody, you may have to pay for child support, which the court dictates. And if a court rules that you have to pay a certain amount, you are legally obligated to do so.

Alimony is money that the court orders to be paid to a former spouse within a separation or divorce agreement. If divorce significantly impacts one of the spouses’ income, the court may order alimony payments. The court imposes this measure to assist the spouse’s financial recovery following divorce. If the court orders it in your case, you must include alimony payments in your budget.

 Loss of Health Care Insurance

After getting divorced, you will be dropped from your spouse’s health insurance plan. In the same way, if you had a health insurance plan that covered your spouse, they would no longer be covered by the insurance plan. Many women cannot keep private coverage because they can’t afford to pay for other types of private insurance.

According to this study, nearly 115,000 women in the US lose private health insurance after a divorce. Out of these 115,000, almost 65,000 women become uninsured. The study also reports that this is not a temporary loss of coverage; women seem to remain uninsured for more than two years following a divorce. This insurance loss further contributes to many divorced women’s economic downfalls and the financial risks women face during and after a divorce. 

COBRA may let you keep your health insurance for a short time after divorce. If your ex-spouse had health insurance through a company with at least 20 employees, COBRA lets you stay on that plan for up to 36 months after you split up. You can keep that plan unless you get remarried or sign up for a new one. But COBRA premiums can be expensive, and you must pay for your coverage.

A cheaper alternative might be to get employment and seek healthcare coverage there. Besides healthcare benefits, if you are not already employed, getting a job after divorce can help maintain or improve your pre-divorce living standard.

Marital Debt

Some women may be unaware that one of the financial risks women face during and after a divorce concerns their total marital debt, including the primary mortgage, home equity line of credit, auto financing, credit card debt, 401(k) loans, and student loans. If you signed a loan as a borrower or cosigned a loan for your spouse, you are legally liable for the debt associated with the loan.

Your divorce decree will specify which spouse is responsible for which debts, such as who owns the house and who is responsible for the mortgage payments. However, creditors do not honor these decrees, and if your ex-spouse fails to make a payment on time, your credit score may suffer.

You may be able to divide assets between you and your spouse by signing a post-marital agreement. The same can be achieved by signing a prenup or a prenuptial agreement while you are still married, which ensures that in the event of a divorce, each spouse is only entitled to the assets they brought into the relationship. These agreements can help you safeguard your finances by separating your assets. But they can not protect you from the shared marital debt you may have accumulated. Invest in retirement plans, trusts, corporations, or annuities to protect your money from debt collectors if you are worried about your husband’s debt draining all your savings.

Cost of Getting a Divorce

Going to court increases your attorney fees and your court fees. Uncontested divorces typically need only one filing fee. In contrast, couples who contest issues may be required to pay additional fees for motions, court reporting services, and other miscellaneous court expenses.

According to this source, an uncontested divorce can cost an average of $4,100, but a divorce that goes to trial over two or more issues can cost an average of $23,300. The average time it takes to complete the divorce process is 12 months unless it goes to trial, which can take up to 18 months.

You may consider taking out a loan if you can’t afford to pay for a divorce out of pocket. Make sure you research and compare your options before taking out a personal loan to pay for your divorce. Compare loan options because loan amounts, terms, interest rates, and fees vary greatly between different lenders. Avoid high-interest loans like payday loans; they usually charge an exorbitant interest rate, and payday loan debts are tough to get out of. Suppose you don’t want to take out a loan. In that case, other options might include negotiating legal payments to pay legal bills over a period of time, borrowing from friends or family members, or retirement funds. 

These are just five financial risks women face during and after a divorce. Divorce isn’t easy on anyone, but it’s nice there are solutions to combat a messy divorce.

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Lyle Solomon has extensive legal experience, in-depth knowledge, and experience in consumer finance and writing. He has been a member of the California State Bar since 2003. He graduated from the University of the Pacific’s McGeorge School of Law in Sacramento, California, in 1998, and currently works for the Oak View Law Group in California as a principal attorney.