There are a million questions and concerns that swirl through your brain when you start thinking about divorce. Where will I live? Do we have to live together during the divorce? How are the kids going to handle this? Sometimes the one you need to answer first is: Can I afford a divorce? And how will I pay for it?
It is not unusual to think you simply cannot afford it. That’s where the saying, “It’s cheaper to keep her,” came from! But is that really true? When we want to make a large purchase, such as a car or a vacation, what do we do? We look at our finances and we consider how we would pay for it. Also note that the more we want something, the more willing we are to find the money to pay for it. If you really want that motorcycle or that convertible, you are more willing to spend the money on it.
So perhaps the question you need to ask yourself is: How badly do I really want a divorce? Am I serious about getting a divorce or is it just something I am throwing around? I have found that when someone is truly ready to get a divorce, there really is no obstacle that gets in their way. They find the money. They start thinking about where they would live. They consider how they will tell the children. They just figure it out.
I am not suggesting that you throw all caution to the wind. You should absolutely review your finances and all the resources you have available to you to finance your divorce. It is an important part of your planning. If you’re simply not ready for a divorce, then you’re not ready. But if you are ready, then you can afford it and you will figure out a way to pay for it.
Here are some places to start:
- Savings. Obviously, the first place to look would be savings. You can use funds in a joint account or a separate account to pay for your counsel fees. However, just be aware that any funds you use will still be subject to equitable distribution in the divorce. In many cases, both spouses use savings to pay for their counsel fees. It is common to just agree to split the accounts and each party can use their share for their own counsel fees. Sometimes the other party is required to contribute to the other one’s counsel fees, but that does not typically happen right at the very beginning of the case and sometimes it doesn’t happen at all. We are largely addressing here how you find money just to get started. The rest gets sorted out later.
- Credit Cards. While it might not be the most desirable way to pay, credit cards are a convenient way to finance your divorce. Depending on how much credit you have available, you may be able to finance your entire divorce on credit cards. Many people are uncomfortable incurring credit card debt due to interest charges. However, if you are going to get a share of assets, such as equity from the house or other investments that you can liquidate later, you will be able to pay off the credit cards later. Using credit cards is just a temporary means to finance your divorce, especially in the beginning when you must pay an initial retainer. You may also want to apply for new credit cards to ensure you have enough available credit in case you need more.
- Home equity loan or line of credit. Many people already have an open line of credit or funds from a home equity loan. Be mindful, however, that any funds you use against the home will be considered later in the overall context of equitable distribution. That means that if you took $5,000 from the equity, that may be considered as part of your share of the house, unless you agree to something different when you settle your case. If you don’t already have an open line of credit on the home, and you own your home jointly with your spouse, you will need consent and cooperation from the other spouse to open one. If the house is in your spouse’s name and you cannot get his or her consent, you can make an application to the court to force them to do so.
- Investments. If you have investment accounts such as mutual funds, brokerage accounts, stock or bonds, you can liquidate them (or partially liquidate them) to get cash. Many of these accounts also have a cash component so you may already have cash available. If these accounts are in your spouse’s name, the court can order the other spouse to liquidate the account to distribute to both of you to use for counsel fees.
- Retirement Accounts. If you have a 401(k), IRA, Roth IRA, or similar account, you can liquidate funds from these accounts. There are taxes and penalties that may apply, but you can consult with your accountant or financial adviser further if you are concerned about penalties. Sometimes it is possible to just take a loan against your retirement plan without incurring taxes and penalties. It is very common for divorcing couples to liquidate retirement accounts to pay for fees. It’s not the most desirable situation, but if you really need the funds, as many people do, it is an option.
- Pension. While you cannot cash out a pension like you can a 401(k) or IRA, often times you can take a loan against it. There are restrictions on how much you can borrow and how you pay it back, but it is an option you may wish to explore. You can reach out to your financial adviser or the Plan Administrator if you need more information about how to do that.
- Whole Life Insurance. If you have a whole life insurance policy, you may have equity that you can cash out or borrow against. Term policies do not have this option.
- Personal Loan. You can apply for a loan at a bank. It is also common for clients to borrow funds from a friend or family member.
- Divorce loans. There are many loan options available, some of which are specifically provided for divorce litigation. For example, NJ Divorce Solutions offers clients access to eFinance Solution, which is a third-party lender. If any of the other options suggested above are not desirable or even possible, this is another option that is available for financing.
These are only a few options for you to consider when you think about “how can I pay for this.” Sometimes it seems like we don’t have the money, particularly if we don’t have savings readily available or we have a lot of debt, but many people before you figured out a way to get a divorce, and if you really want it, you will too. If you need help evaluating your circumstances and figuring out how you can finance a divorce, or just how a divorce works in general, call us at 732-384-1514 for a comprehensive consultation. You will leave a consultation knowing exactly how to start and what to expect.
We will not tell you what you want to hear. We will tell you what you need to know.