Is there a link between divorce & bankruptcy? There seems to be.
There’s no denying that divorce can be a costly process – from the influx of legal fees to the loss of income caused by splitting one household into two, you simply can’t ignore the financial burdens associated with ending a marriage. So, regrettably, it’s not surprising that many individuals filing for bankruptcy name divorce as the main cause of their financial ruin.
The Link Between Divorce & Bankruptcy
“One of the leading causes of bankruptcy is separation/divorce,” Ted Michalos, a Licensed Trustee in Bankruptcy and Chartered Accountant, told Divorce Magazine. “Fully 20% of our clients disclose this as the principal reason for their financial distress. In reality, I believe the percentage is much higher. When your personal life falls apart, the last thing you think about is who is going to pay the bills. When the relationship ends, you’re left with a financial mess as well as an emotional one.”
Unfortunately, it appears that divorce rates and the financial challenges faced by divorcing couples are on the rise, placing married couples at a higher risk for both divorce and bankruptcy. However, experts say it’s difficult to determine which factor is at the root of the problem.
“Which comes first? Money problems or marital problems?” asks Michalos. “It can be difficult to tell because as a relationship breaks down, people often compensate by spending more. It may involve going out more or buying things to make them feel better. When the relationship finally ends, they discover that they’ve managed to increase their debt to the point that neither person can service it after the break-up.”
Despite the belief that divorce rates have been dropping since the 80’s, new research indicates that modern marriages may be less stable than ever. Previously, data suggested that the divorce rate has been declining over recent decades, but a new report from the Minnesota Population Center at the University of Minnesota reveals that this is not case.
Although the Census Bureau’s American Community Survey did not include a series of questions related to marriage and divorce until 2008, the census results in recent years have demonstrated that America’s national divorce rate has not been declining since 1980, as research previously suggested.
In fact, the Minnesota Population Center says that the age-standardized divorce rates in America have actually grown by 40% since 1980. For many of the couples at risk for divorce, bankruptcy often becomes a necessary evil once a marriage has ended.
“I often describe bankruptcy as the final pill to swallow after a divorce or separation. After everything else has been sorted out, both parties find themselves trying to repay the debt accumulated by two people with one person’s income,” explains Michalos. “Bankruptcy provides the final release from marriage debts.”