By Daniela Baker
Divorces are difficult for everyone involved – not just the emotional turmoil, but also the financial toll. Thankfully, both ex-partners can take some steps to come out of the proceedings in the best financial situation possible. Much of it depends on timing.
I hope there’s no divorce in your future, but if there might be, here are the five best situations to start from, along with the reasons why.
1. When there’s minimal credit card debt
Prior to deciding on divorce, you’ll want to get a complete financial picture of your household, including all joint and individual debts. This is especially important if you are living in a community property state.
Community property laws vary by state but some states view debts as well as assets as community property. So if your spouse has accumulated quite a bit of credit card debt during your marriage, you could be held legally responsible for these debts. If he or she decides to stop making payments on these cards, you might have to pay. Fail to do so, and your credit could take a serious hit.
2. When it’s a seller’s market
Unless you’ve determined that one of you will get the house as part of the divorce settlement, you’ll be in a much better financial situation if you divorce during a seller’s market: a period of strong prices. This will help get the most money from the sale of the house, so you can cover all mortgages and have money left over to split.
If it’s a shaky economy and housing prices are in decline – like it’s been in many parts of the country for the last few years – then try to agree that one of you get the house as part of the settlement. This way, neither of your savings accounts will take a hit for having to cover the difference between the sales price and the remaining loans.