Here’s How to Pay for a Costly Divorce

June 12, 2023
 By Erin H.

In the U.S., between 40% and 50% of marriages end in divorce, according to LegalJobs.io. As sad as those figures may seem, they’re accurate. If your family relationships eroded and you need to leave your marriage but think you lack the resources to do so, read on to learn how to fund it.

Do the Paperwork Yourself

Most US divorces don’t cost that much. If you file the paperwork yourselves, it typically costs about $200. That’s an estimated figure which varies slightly by state. For example, in 2020, the divorce filing fees in Colorado cost $230. Hiring attorneys to help with the paperwork increases the cost to about $2,000. The only costly divorces require extensive legal battles, so if you can both agree to divorce and how to divide what you own together, you can get away from each other rather cheaply.

Put It on Your Credit Card

Because an uncontested divorce only costs about $2,000, you can put it on your credit card. If you have a credit card that charges low interest or pays you cash back, use it for this modest bill and earn your freedom. You can pay it off each month, and it won’t add another line of credit to your credit report.

Take Out a HELOC

Fund divorces inherently take longer using a home equity line of credit (HELOC). Divorces between individuals of higher incomes may take longer even when both parties agree that they need to divorce. These divorces require the help of an attorney and CPA to create instruments for the financial settlements, such as a Spousal Lifetime Access Trust (SLAT) that lets you use your gift tax allowance to shelter up to $12.06 million from your estate in an irrevocable trust, according to Perlin Estate Planning.

Borrow from Your 401K

Although you’ll pay taxes on the money and a 10% penalty at tax time, the money’s already yours, so spend it as you need to do so. While this isn’t a loan, you will need to pay it back, so you’ll have the funds for retirement.

Cash-Value Life Insurance Loan

If you have a cash-value life insurance policy, you can borrow from the cash-value account you’ve built through the years while paying premiums. Comprised of both a whole life insurance policy and savings or investment account, these insurance options let you save and insure yourself at the same time. You can borrow from the cash value account once it has vested.

Secured Loan Against Your Securities

Instead of selling your securities, take out a loan using them as collateral. Although this option involves some risk, it does offer a quick way to fund your divorce. You also avoid selling any stocks or bonds, so they can continue to earn money for you.

Personal Loans

Take out a standard personal loan. This option works if you have good credit. Shop around for interest rates to get the best deal. Rates fluctuate but top out at around 25% in the US.

Borrow Money from Family

Most families know when a marriage goes bad. They don’t want the couple to live in an unpleasant situation and will help if they can. Ask to borrow the money to file the divorce papers and hire an attorney.

Combining the Options

Divorces can become quite costly, but they can also happen on a budget. If your divorce requires a lengthy court battle because your spouse won’t agree or due to custody issues, combine these funding ideas. Perhaps a HELOC with a personal loan can fund the legal battle. A combination of putting it on your credit card and taking money out of your 401K could also work. When it comes down to it, it makes sense to find the money so you can live happily single.


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