Financially ruined by divorce

In addition to emotional damage, a divorce also causes great financial damage. One of the largest expenses is a recently purchased home. Most married people have not recorded any different agreements regarding the marriage with the notary. This means they are married in community of property. From the moment the marriage is concluded, all assets of both partners are jointly owned. This also applies to assets that the partners already had before the marriage. If one of the partners owns assets and the other has no assets, the insolvent partner becomes co-owner of the marital assets after the marriage. When the marriage is broken, the assets (and debts) must be split.

Financial consequences of a divorce

The assets must be split and both partners are entitled to half. This means that not only the money, but also the belongings must be divided between both ex-partners. Both people have to invest a lot of money to pay for another house (rent), or to redecorate the house. In addition, you may also have to pay alimony for the ex-partner and for the children. Your pension will also have to suffer. In many cases, the ex is also entitled to part of the accrued pension rights. As a result, you will still feel the consequences of the divorce even after your retirement. Families who have recently purchased an expensive home on two incomes may find themselves in significant debt due to a divorce.

Recently bought a house on two incomes

During the crisis from 2008 to 2010, many homeowners got into trouble due to a combination of a divorce and a declining housing market. Due to falling house prices, the value of the house continues to drop compared to the mortgage taken out. Most homeowners have fully financed the house and associated costs. As a result, the mortgage is already higher than the value of the house at closing. In a declining housing market, the difference between the sales value of the house and the mortgage becomes even greater. Problems arise during a divorce because the partners are unable to meet the monthly costs without the ex’s income.

Selling a house in a declining market

If the sales price remains below the mortgage amount, a debt remains after the sale. This can be quite expensive for more expensive houses.

Example

A house was bought for 400,000. By also financing the additional costs, the mortgage debt has reached 440,000. Two years later, the homeowners divorce and have to leave the house because one person cannot bear the burden. Due to a heated argument, it is necessary for one of the parties to move to a rental house (so the costs will increase). House prices have fallen five percent in those two years. The asking price is set slightly higher, but the sales price will probably be: 380,000. Assuming that they actually receive this amount for the house, a residual debt remains of: 440,000 – 380,000 = 60,000. Each person therefore has a debt of €30,000 to pay off. This is in addition to the other financial obligations that the divorce entails. See also: How much does a divorce cost? Divorce and insurance