How Can You Settle Debts After A Divorce?
If you get divorced and wind up responsible for debts you incurred with your former spouse, there are many forms of debt settlement that can alleviate financial stress in this often financially difficult time in your life. Let’s cover what your options might include and what some of the pros and cons of each are.
Transfer Joint Credit Card Balances To New (Single) Accounts
For those who are fortunate enough to still have a decent credit score after a divorce, one of the best options for settling unsecured debts taken on during the marriage is transferring those balances to a new credit card account in your name only. For those with good enough credit, you may even be able to get low introductory rates that save you interest charges right when you need help the most.
One thing to keep in mind about intro rates is that they usually don’t last forever. Often, intro rates only last a matter of months, so be sure to check what the rate will be after the introductory period. There’s a chance the rate after the intro rate could be far higher than on your joint credit card, so be detailed in your search for a card to transfer balances to.
Credit Counseling Services
Credit counseling services, sometimes called debt management plans, help work out agreements between you and your creditors to create a plan to get back on track financially.
Typically, you’ll deposit a predetermined amount of money with the credit counseling agency each month, enabling you to more easily budget each month’s debt expenses.
The credit counseling agency then uses those deposits to pay off your creditors on a schedule they help set up for you.
While these programs are often highly beneficial, sometimes fees are associated with debt management programs.
Usually, credit counseling agencies charge a set-up fee and a monthly fee. Sometimes, if the fees are too much of a financial burden, there’s a chance your fees can be waived for you.
Chapter 7 or 13 Bankruptcy
Bankruptcy often drags people’s credit down for seven to ten years, making this the most drastic form of debt settlement after a divorce. Sometimes, despite the negative credit impact, a bankruptcy does make financial sense.
There are different Chapters of bankruptcy you can choose from, and each one has merits and drawbacks to keep in mind when deciding your options for alleviating debt stress.
Beyond the credit hit for ten years, Chapter 7 bankruptcy requires all non-exempt assets to be sold to repay your debts. And because with Chapter 7 you’re limited by income requirements, many folks qualify for this form of debt relief.
On the other hand, Chapter 13 requires you to pay a portion of your debts over five years, with the payment amount determined by a judge based on the bankruptcy laws in your state. This type of bankruptcy stays on your credit report for seven years. An additional merit of Chapter 13 is that onces the accounts in the bankruptcy have been paid off, they are removed from your credit report.
All things considered, bankruptcy is costly. Legal fees for attorneys are just the beginning—the additional costs caused by a hard hit to your credit for the next ten years can add up to thousands in extra interest paid every single year due to higher rates. Still, this is an option that’s best for some scenarios after divorce.
Debt Settlement Programs
A less severe and costly alternative to bankruptcy after divorce is a debt settlement program from a debt relief specialist like Alleviate Financial.
Working with the right debt settlement company could lower the amount of debt you owe dramatically. By settling your debts, you could potentially save thousands on your creditor interest and fees. Debt settlement is also a far better option than bankruptcy in many cases. Let’s cover some of the ways debt settlement can help alleviate financial stress after a divorce.
Stop Creditor Collections Efforts
One of the worst parts of dealing with unsecured debts after a divorce is the harassing phone calls and letters that start streaming in, constantly reminding you of your less than ideal situation. Fortunately, a debt settlement program from Alleviate Financial can help provide debt relief that stops harassing collectors from bothering you.
For those who have savings built up in their name alone, a lump-sum settlement is an ideal way to reduce the debts you incurred while you were married significantly. With a lump-sum debt settlement, creditors are enticed to give you a larger discount in return for getting a bigger payment all at once. This can sometimes result in slashing debts in half, so if there’s a way to make this work financially, it could save you thousands.
Payment Plan Settlements
Settlements based on a payment plan reduce your debts in a predictable way that’s faster overall. Usually it takes less than a few years to complete the settlement payoff.
Whether a lump-sum settlement or payment plan settlement is right for you, the expert negotiators at Alleviate Financial will help you come to an agreement with your creditors.
You may be able to reduce your debt balances, including interest charges, late fees, and over-the-limit fees, making it easier to get out of debt and get on with your life.
Debt Consolidation Loans
Pay Your Debt Off Sooner With Simple Interest
A major benefit of debt consolidation loans is the way the interest charges are structured. Credit card debt is revolving, so every time your balance carries to the next month, you’re charged interest on the whole amount.
This puts you at a huge financial disadvantage, because you end up paying interest on the interest charges from the month before and every month after that you keep a balance.
Compare this with debt consolidation loans, which charge simple interest instead, resulting in interest charges that can be tens of thousands less by the time you pay the debt completely.
Secured Accounts Can’t Be Consolidated With Unsecured Debts
Debts that are tied to tangible assets like cars and houses are called secured debt. This type of debt is simple interest just like debt consolidation loans, so there’s often no benefit to consolidating these debts using consolidation loans. More importantly, secured debts can’t be combined because they’re backed up by real property that secures the loan repayment.
Sadly, Student Loans Aren’t An Option
Although student loans are technically unsecured debt, these loans cannot be included in debt consolidation loans with credit cards or collections accounts. However, sometimes student loans can be combined into a single loan, but this is almost always achieved through student loan-specific lenders.
Need Help Settling Debt After A Divorce?
Whether debt settlement, credit counseling, or debt consolidation makes the most sense for your financial situation after a divorce, Alleviate Financial can help. Your first step is contacting us for a risk-free debt relief assessment.
Click here to see what type of debt relief you qualify for and get started on a brighter financial path.