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Property & Financial Issues on Divorce
The legal process of dividing up the assets and debts who gets the house?
Finalising a settlement what is a Clean Break and is it right for me?
The starting point for division of all matrimonial assets and liabilities is a split of 50:50 between you. I cannot emphasise strongly enough however that this is very much just a starting point and either party may seek to argue that this should be departed from. Often this is on the basis that one party has greater needs than the other as he or she will be taking on the care of the children. In practice it has to be said this is often still, rightly or wrongly, the woman.
There may well also be other factors which one party seeks to argue should be taken into account to justify a departure from a fifty-fifty division and these are listed further below. Finally, any proposed settlement has to be tested against the yardstick of equality.
In order to ensure that any settlement reached is appropriate and fair, it is necessary for both parties to effect full and frank documentary financial disclosure. Any agreement reached without this may later be set aside if it transpires that a party has failed to reveal relevant assets.
Once a financial settlement has been agreed, it is generally sensible to have what is known as a Consent Order drawn up and endorsed and sealed by the Court to reflect the terms of the settlement. No other form of agreement will constitute a guaranteed final solution.
Where possible it is desirable to achieve a clean break in order to ensure finality. This means that there can be no further claims against you by your spouse in the future and vice versa. This is not always possible, for example, where there are young children and the parent who cares for them needs spousal maintenance.
The Court takes a number of factors into account when deciding how matrimonial assets should be divided. There are no hard and fast rules however, and the ultimate decision of the Court is very much a discretionary one. The factors the Court considers are contained in Section 25 of the Matrimonial Causes Act 1973 and are as follows:
1. First consideration to the welfare of any children under 18
2. All the circumstances of the case
3. Specific factors:
- Income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future including in the case of earning capacity any increase in that capacity which it would in the opinion of the Court be reasonable to expect a party to the marriage to take steps to acquire
- The financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future
- The standard of living enjoyed by the family before the breakdown of the marriage
- The age of each party to the marriage and the duration of the marriage
- The physical or mental disability of either of the parties to the marriage
- The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family including any contribution by looking after the home or caring for the family;
- The conduct of each of the parties, if that conduct is such that it would in the opinion of the Court be inequitable to disregard it;
- In the case of proceedings for divorce any benefit (for example a pension) which by reason of the dissolution of the marriage, that party will lose the chance of acquiring.
If agreement cannot be reached through correspondence between your solicitors, or through you and your spouse attending mediation, then the next step would be to issue proceedings at Court for what is known as Ancillary Relief. This would invoke a strict Court timetable for full disclosure of financial information by both you and your spouse by a certain date.
You would then be given an opportunity to ask questions of your spouses disclosure and they of yours.
The matter would then be listed for a First Appointment at Court. This appointment provides an opportunity for the parties and their lawyers to negotiate. Sometimes settlement is not possible at this stage due to lack of information; for example, it may be that the parties cannot agree on the value of the matrimonial home. The Court may then order that a valuation be done in time for the next Court appointment, which is known as a Financial Dispute Resolution hearing.
This hearing provides a further opportunity for negotiation. If the parties are still unable to reach settlement, the Judge on that day can sometimes give an indication to the parties of what he or she might consider a suitable settlement.
If this does not assist and the parties remain in dispute, the matter will be listed for a final hearing. This hearing will be heard by a different Judge who will not be aware of any previous discussions at Court or the Judge at the second hearings indication, and is therefore totally independent. This Judge will hear you and your spouse give evidence and will then impose a decision on you both.
Am I entitled to maintenance for myself? How much? How long for?
Spousal maintenance is normally paid to the parent with care in a situation whereby their earning capacity is restricted by reason of the care of the children.
There are no set levels for this however and the Court would very much look at each partys reasonable needs. If it is determined that periodical payments (as spousal maintenance is formally known) are appropriate, they would normally end should the receiving party cohabit or re-marry. Sometimes, it may be appropriate for spousal maintenance to be paid for a specific term of time only; such as a few years to allow one party to retrain, get the children into school and then start back at work. It is quite rare for the Court to order spousal maintenance to continue for the parties joint lives but this may be appropriate after a very long marriage or where the receiving spouse has no prospect of improving their own income, for example.
If the receiving party is in receipt of means tested state benefit any money received would have to be declared to the Department for Work and Pensions who would in turn deduct this pound for pound from the benefits.
If the paying party does not have the means to meet maintenance payments which would otherwise be appropriate but it is possible that the situation might change in the future, such as if an unemployed party returned to work, then it may be considered appropriate for there to be what is called a nominal maintenance order of say 1 per year.
This would allow the receiving party to seek to increase the amount, either by negotiation or application to the Court to a more substantial sum which could be paid, for example, each week or each month. This does mean however, that there cannot be a full clean break.
Financial Survival and Independence help and tips on taking control of your finances, budgeting, managing debts and going back to work
Unfortunately, divorce and debt often go hand in hand. So many women sadly find themselves struggling to make ends meet, managing suddenly on only one income, possibly from benefits alone, whilst also trying to pay off substantial debts that they have no conceivable way of paying off for many years.
I all too often come across cases where the couples debts exceed their assets. Often, it seems that the family has just lived beyond its means for too long, using credit cars to get by. Financially, divorce can be horrificor it can be viewed as an opportunity to work out the finances and clean the slate as best as possible for a fresh start. To take advantage of this opportunity however, both sides must accept that the goal is not to financially ruin the other but to strive to reach a fair and sustainable settlement. It is vital to appreciate before commencing this process, however, that a lifestyle previously shared by one household simply cannot support two.
The first thing to look at is who is responsible for, and who is liable for, the debt. The two are not necessarily the same thing. A credit card may be taken out in joint names but statements may reveal that the Husband has run up a tidy sum wining and dining his new girlfriend! The wife will be equally liable to repay the debt as far as the credit card company is concerned but she clearly wasnt responsible for running up the debt so its not fair for her to have to share it.
This should be raised in the financial discussions and the Wife given credit for her prudence compared with the Husbands frivolity. On the other hand, where a Husband has had no option but to pay for the kids clothes, the family shopping, last years holiday and his fuel expenses driving to work on a credit card held in his sole name, it is hardly fair for the Wife to avoid any responsibility for the debt in terms of sharing the matrimonial assets and liabilities, even though she is not strictly liable to the credit card company, when she has clearly taken an equal benefit from the expenditure incurred.
The question to ask is, Who has benefited from the debt? In the former scenario described above, it would probably be appropriate for the Husband to promise to take sole responsibility for the debt and indemnify the Wife. In the latter scenario, the debt might be paid from the sale proceeds of the matrimonial home before the balance is divided, or the Wifes half share of the debt might be deducted from any lump sum the Husband is due to pay to her. Both approaches help to even things out.
So thats as far as looking at debt within the setting of the divorce financial negotiations goes - but what about in practical terms during and after the divorce?
You could consider the following:
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Checking your Credit as this can affect your ability to get a mortgage or loan in the future. Contact Experian for advice on how to do this. If you have any black marks they can also advise you on what to do to clear these and improve your credit rating.
- Debt consolidation - Contact the CAB or an Independent Financial Advisor for help to see whether a consolidating loan to reduce your monthly repayments, or a voluntary arrangement with creditors to try and negotiate a payment plan, may be a way forward.
- Bankruptcy - this is an absolute last resort as it can affect your ability to get future credit, certain jobs, affordable insurance rates, or even a home (as mortgage lenders may not accept your application or may only do so at higher interest rates).
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Cutting up those credit cards! - Save one if you really must for emergencies only (genuine ones not shoes!!)
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Setting a Budget Make a list of your income and outgoings. You can use good old fashioned pen and paper or a spreadsheet if you have Excel. Then consider any income areas you can improve on and any outgoings you can reduce. Some ideas:
- Can you source cheaper childcare?
- Do you really need Sky?
- Can you change your utilities to cheaper providers and get cheaper car and house insurance?
- Prepare a meal plan before doing your shopping list then stick to only what you need.
- Check that you are getting the right amount of benefits and child maintenance.
- Do you have a hobby, such as card making, that you can do from home and turn into a small business?
- If you dont already work full time, can you manage a part time job / doing another shift?
- If you do work already work full time, is it about time you had payrise or promotion?
All of the above require you to make some lifestyle changes. Sum up the nerve to do so and show those around you your mettle. Divorce entails a momentous lifestyle change, theres no two ways about it. The focus has to be on not allowing this to consume you. Instead, rise from the ashes and move onwards and upwards.
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