Many experts agree that there is a link between the 1.2 million people who file for divorce in the United States and the 1.4 million that file for bankruptcy. VISA corporation did a survey over the past few years and found that divorce is the 4th most common reason people file for bankruptcy.
Attorney fees certainly may lead to a financial strain. However, the structure of property division may also contribute to insolvency. When a couple splits, they divide both assets and debts. Sometimes, one spouse hasn’t been in the work force for years and finds her skills rusty. Keeping up with her debt obligations becomes impossible, and coupled with the financial hit she took for attorney fees, she may find bankruptcy the only alternative.
To add to the mess, all debts incurred during marriage remain intact after marriage. If one spouse who was assigned a debt in the divorce decree defaults, the other will be liable to creditors. So, for example, an ex-husband was the breadwinner and he was assigned all the debts in the divorce decree. The ex-wife moves to a small apartment and slowly re-enters the work force. She’s barely getting by…Suddenly, she gets a call from a collection agency telling her she owes $5000 on credit card debt. To her dismay, her ex had lost his job and stopped paying the debts. In this scenario, bankruptcy would probably be the only option. I bet she wished she had mediated instead!