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The divorce leads many Canadians to declare bankruptcy. This phenomenon is rather disturbing, given the fact that divorce forecasts show an intensification of this trend. In fact, a Canoë study (in French) published in 2011 suggests that 67% of the couples who got married after 1990 will have divorced by 2030.

The costs of a divorce

According to a Canadian Lawyer magazine survey, the costs of a divorce by agreement vary between $1,000 and $2,600. It’s a relatively affordable amount. Unfortunately however, a divorce is based on emotions, which do not mix well with finances. The fact is substantiated in the same survey, which determines the average costs of a disputed divorce at $13,000 and states that they may even, in some cases, exceed $70,000. Therefore, the ideal way to reduce the expenses associated with the divorce process is to find a common ground acceptable to both parties. Otherwise, such expenses will be higher, and consequently the parties’ personal finances will quite probably be under a major stress. Amongst others, the main expenses to be considered, are:

  • lawyer fees: between $150 and $500 per hour;
  • costs for experts (psychologist, for example): between $2,000 and $15,000;
  • legal stamp (opening of the case): provision of $200 (varies according to the province or the territory);
  • bailiff fees;
  • notary public fees.

The other financial impacts of a divorce

Given all these factors, each one of the two parties may be facing major debts before the divorce is even formalized. Not to mention that the burden of the financial responsibilities previously shared by both will no longer be common.

For each divorcee, such expenses as the rent and the electricity, heating, cable, Internet services and grocery bills, as well as car related costs and insurance premiums will from then on be paid for with one salary only. Furthermore, as the case may be, one may have to consider new disbursements such as an alimony or a compensatory payment after divorce. Such expenses certainly do not make the management of one’s finances easier.

The good old budget remains therefore the compelling starting point before the consideration of any major purchase. It will enable to determine his or her real borrowing power, and as such reduce their risks of over-indebtedness. It would be appropriate to go through this step even before taking out a new mortgage or signing a lease, for example. Whoever neglects to go through this step is liable to face debt problems who, in turn, may lead him or her directly to bankruptcy.

The impacts of a bankruptcy before divorce

Sometimes, financial problems may lead to discord, if not directly to a divorce. Such problems may even become aggravating if one party or the other files for bankruptcy before the divorce is officially granted. In such a case, all joint debts — mortgage payments, reimbursements of the car purchase, credit card balances, etc. — become the responsibility of the party that is still solvent, who may thus be forced to take on the payment of huge debts.

To avoid difficulties of this nature, it becomes essential to make sure that the separation process does not linger. The longer it lasts, the higher will be the risk of a deterioration of finances. It is also furthermore advisable to cancel as soon as possible all the joint accounts and credit cards to prevent any unusual cash withdrawal or unreasonable expense.

On the other hand, it is also possible, if the couple as a whole faces debt problems, to file for a joint bankruptcy. Even though it is possible to save money by doing so, it is not advisable to use such a solution should the separation be imminent. Under a joint bankruptcy, each one of the bankrupts will have to show that he has fulfilled the established conditions before being discharged. But if one of the two parties failed to meet his responsibilities, the other will also suffer the consequences of this deficiency.

If you are in the process of divorcing or separating, and if these circumstances are the cause of a major financial stress, please do not hesitate to contact promptly a Ginsberg Gingras trustee in bankruptcy. Together, we will take a snapshot of your situation, and find a solution to your debt problems. You may even have access to alternatives to bankruptcy, including the consumer proposal.

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