Divorce debt is on the rise – and the retirement mistake many don't see coming

Divorce can be one of life's most emotionally difficult experiences. Increasingly, it's becoming one of the most expensive too.

As the cost of living continues to rise and access to legal aid remains limited, more people are borrowing money simply to afford the process of ending a marriage. Campaigners warn that so-called ‘divorce loans’ are leaving some women in particular with debts that follow them for years after the divorce is finalised.

Divorce debt can affect anyone. But family law experts say women are often particularly vulnerable because they are more likely to be lower earners, have taken career breaks or reduced their working hours to care for children.

There's also another financial danger that receives even less attention, one that can have an even bigger impact on women's long-term financial security.

We spoke to Deepika Bhoolah-Bansal, associate at Stowe Family Law, who explained how many women focus on keeping the family home while overlooking assets that could protect them throughout retirement.

And the consequences can last decades.

The rise of divorce debt

Nobody gets married expecting to take out a loan to pay for a divorce.

Yet lawyers are seeing it happen more often.

"It’s not uncommon for people to seek funding for their divorce costs. In many cases, clients will get financial help from family members, such as parents or siblings, who will cover some or all of the payments. We have seen a rise in people taking out divorce loans to cover costs, particularly as we are still living in an uncertain economic climate where the cost of everyday living is still rising,” says Deepika.

Divorce loans, typically provided by litigation funders to pay legal fees, are designed to help to help cover the costs of separation. But while they may offer short-term relief, they can create long-term financial pressure.

"It’s really important to remember that divorce loans do have to be repaid, like any other kind of borrowing, and clients should not be taking them out unless they have a repayment strategy,” she says.

The debt doesn't disappear once the legal process is over. Interest continues to build, repayments remain, and financial recovery can take years.

For women approaching retirement, the impact can be particularly severe.

"The long-term financial impact can be very serious, particularly for women nearing retirement who have less time to rebuild savings or earning capacity,” says Deepika.

Why women are often more vulnerable

The reality is that many women enter divorce at a financial disadvantage.

Despite progress, the gender pay gap remains. Women are more likely to have taken career breaks, reduced working hours or stepped away from work entirely to care for children and manage family life.

"Women are often paid less for the same job, and stereotypically are the lower earner in a heterosexual marriage or relationship. Women also are usually the parent to take time out of working, or reduce working hours, to care for the household and raise children, lowering their overall income."

When legal costs arrive on top of those existing financial pressures, borrowing can appear to be the only option.

The family home isn't always the prize it seems

For many divorcing parents, keeping the family home feels like the obvious goal.

The house represents stability, security and continuity for children whose lives have already been turned upside down.

But lawyers say this is often where women make one of the most costly financial decisions of the entire divorce process.

"One of the things we see most often is that women will focus on the immediate financial and practical needs for themselves and any children – this usually means they wish to keep the family home."

The problem is that a house can become expensive to maintain on a single income. Mortgage payments, repairs, bills and upkeep can quickly become unaffordable.

And in fighting to keep the property, many women end up sacrificing something potentially more valuable - their pension rights.

The asset many are leaving behind

For some couples, the largest asset in the marriage isn't the home at all.

It's the pension.

Yet pensions are regularly overlooked during divorce negotiations.

"Many women will not seek a share in their spouse’s pension, despite the gender pension gap being significant,” says Deepika.

Some simply don't realise pensions form part of the marital assets. Others are focused on more immediate concerns, such as housing and childcare.

But the long-term consequences can be profound.

"This can leave them vulnerable not only in the short term, as maintaining the same home under one income becomes difficult, but in retirement as well."

The pension myth that keeps costing women money

One of the biggest misconceptions in divorce is the belief that pensions belong solely to the person whose name is on the account.

According to Deepika, this misunderstanding is remarkably common.

"People don’t consider them to be a joint asset that forms part of the overall matrimonial pot."

Because pensions are held in individual names, separating couples often assume they are off limits.

The issue is especially common when couples attempt to handle the divorce process themselves and don’t seek legal advice.

"This often means they can be ignored, particularly if separating couples do a DIY divorce."

Think beyond the next year

Divorce naturally forces people to focus on immediate challenges.

Where will I live? How will I pay the bills? What happens to the children?

But experts say one question is often missing from settlement discussions:

Will this decision still make sense in 20 years' time?

"A key warning sign is when a settlement feels 'safe' in the short term but hasn’t been properly tested against long-term financial reality,” says Deepika.

A settlement that solves today's problems may create tomorrow's.

How to protect your financial future

Family lawyers say people should think carefully about the long-term impact of every financial decision made during divorce.

That means considering:

• whether pensions have been fully valued and included in negotiations
• whether keeping the family home is genuinely affordable on one income
• whether all assets have been properly disclosed
• whether spousal maintenance could provide financial stability while rebuilding independence
• how the settlement will affect retirement plans

As Deepika says:

"Women should consider how the settlement will affect them 10 - 20 years down the line, particularly in relation to retirement, earning capacity, and cost of living.”

Divorce shouldn't mean a lifetime of debt

For many, divorce isn’t simply the end of a relationship. It's one of the biggest financial turning points they will ever face.

The pressure to keep the family home can be intense, as can the temptation to borrow. The desire to get the process over with as quickly as possible is completely understandable.

But experts warn that the decisions made during divorce can shape financial security for decades.

Those who emerge in the strongest position aren’t always those who secure the house.

Often, they are the ones who understand the value of every asset available to them, including the pension that could protect them long after the divorce is over.