DO IT YOURSELF DIVORCE PART TWO: GATHERING THE ESSENTIAL FINANCIALS

In the first article about do it yourself divorce, I discussed what to do before getting started. The next step in the do it yourself divorce process is very important in deciding whether this is right for you.

Florida divorce law requires that parties getting divorce file financial affidavits and list all of their assets and liabilities. In order to draft a complete Marital Settlement Agreement, you need to know everything you own and everything you owe. This would include all bank accounts, credit card statements and retirement accounts. It is highly recommended in do it yourself divorce situations that you obtain current statements for each and every account that you and your spouse have, whether the account is in one or both names. In a do it yourself divorce situation, you and your spouse should be on good enough terms that you share this information with one another. All of this information must be listed on a financial affidavit and both parties must sign under oath that they have provided full disclosure to one another of all assets and liabilities and that the information provided is truthful and accurate. You will need this information to decide how you are going to divide your assets and liabilities.

Once you have a Florida financial affidavit and all information about your assets and liabilities, questions may arise. Is an asset or liability marital or nonmarital? How do you split credit card debt? What happens with a retirement account that began before the marriage? What about pensions and profit sharing? A divorce lawyer can advise you about whether an asset or liability is marital or non marital. This is one of the things that should be addressed in your initial divorce consultation. Credit card debt can be a tricky issue if both parties names are on a specific credit card and the debt is to be split. In a do it yourself divorce situation, you need to think about how you are going to divide this debt and how you will protect yourself and your credit if your spouse does not pay his or her share. When it comes to retirement accounts and pensions, you may want to consider hiring a financial professional to perform a valuation of the account, pension or profit sharing. You should also speak with your divorce lawyer about your obligation to divide these assets or your rights to a portion of these assets.

The Florida financial affidavit also requires that both parties list their incomes. What happens if you do not know your monthly income? This is a common question for business owners or those who are paid by commissions. In those situations, it is important to speak with a financial professional, such as an accountant, to get advise regarding how to calculate your monthly income. If you have questions about how much your spouse earns, you should address these questions with a divorce lawyer or an accountant.

These are just a few examples of questions and issues that may arise during the do it yourself divorce process. The financial portion of a divorce may be the most challenging aspect in the do it yourself divorce process. The important thing to keep in mind is that many decisions you make in this part of the process may be binding and non-modifiable so it is crucial that all of your questions are answered before you proceed. If you have questions or concerns about these or other financial aspects of your divorce, speak with your divorce lawyer or accountant before making any decisions about dividing property, assets and liabilities.

Divorcing when times are tough

Its no secret that money is one of the biggest stressors and topic of frequent arguments. In the present economy, most people are concerned about, if not completely frightened over, their financial situation. Concern leads to fighting and, in unions which were already rocky, the present economic woes are enough to bring things to an end. But, with layoffs happening or looming, houses not selling and their values decreasing more and more each month, many people are becoming stuck between wanting to end their marriages and not being financially able to do so. More and more couples find themselves in this situation. And the frequently asked question is: what do you do when you can't afford to divorce?

The first step is to figure out where you are financially. I advise clients to write out their monthly financial expenses and figure out their present monthly need. Once you have that information, you are in a much better place to make decisions. The next step is to separate the fixed expenses such as monthly mortgage and taxes from the discretionary ones such as cable and cleaning service and figure out which can be reduced and which can be eliminated altogether. This gets you to the actual bottom line amount needed on a monthly basis.

For many people these days, it would be difficult or impossible to pay the monthly household expenses on one income, even with reducing or eliminating those expenses. If one person moves out, he or she now has to pay rent and utilities elsewhere, meaning that there is not enough money to go around. If this is the case, then asking or forcing your spouse to move out of the house immediately simply will not work.

In a previous post, I offered some suggestions for those who need to continue living together during and after divorce. In this post, I'll address more of the practicalities such as bill paying and separating finances. While it is easier to maintain a joint account, deposit all funds into that account and pay bills jointly, this situation may not work for some. It leads to disagreements about the discretionary spending of each party. Once a couple has separated, neither party wants their earnings to pay for the other parties meals out, shopping or other forms of entertainment. If a couple is going to be living together for an indefinite period of time, such as, until the house sells, a preferred course of action may be to split accounts rather than maintain completely joint funds. Both parties can pay the joint living expenses such as the mortgage and utilities and agreed upon children's expenses and can do so from a joint account. But personal charges and spending should be kept separate and paid from separate funds.

Another suggested course of action is to separate credit cards. Hopefully, each party has at least one credit card in their own name or enough credit history to open one. Removing each other as a signer from the credit cards in the name of the other may also be recommended. A joint credit card can be used to pay agreed joint expenses and separate cards can be used for each party's personal expenses.

Equity lines, if you still have one these days, should only be used by agreement and for joint expenses. Keep in mind that, if you file for divorce later on, or have already filed, you will have to account to your spouse, and vice versa, for any funds removed from an equity line. Withdrawing funds from an equity line without telling your spouse and/or using them to pay your separate debt and expenses will cost both of you in the long run. This will only create confusion, anger and more attorneys fees spent in determining how the funds were spent.

If you have a car with a high monthly payment, look into selling or trading it in, if possible. This may not be an option if you owe more than your car is worth. But if there is some equity, even a minimal amount, you may be able to lower this payment and reduce your monthly expenses.

If you own a house that neither of you can or want to maintain, consider your options carefully. Find out the present value of your home and the likelihood of it being sold. Ask a realtor for a list of recent sales of comparable homes and the selling prices. If you owe more than your home is worth, talk to a bank representative or other professional about your options.

Keep in mind that the above are only suggestions and not legal advice. Every situation is different and what works for one couple may not work for another. Before taking any steps to separate finances or reach an agreement with your spouse about how to pay bills and how much should be paid by either party, it is extremely important to seek the advice of a financial or legal professional.

We can’t afford the house and a divorce- the impact of the housing crisis on separation

Its becoming a sadly familiar scenario. A couple can barely pay the mortgage and expenses every month with their joint incomes. Divorce is on the horizon. The parties want to separate but cannot afford to live apart. What is there to do?

Unfortunately, there is no magic solution. Neither judges nor lawyers can make a house sell or create more money than that which exists. We can only deal with what is there. Mortgages and expenses must be paid. And, if there isn’t enough money to go around, those who desire to separate may have to continue living together. Needless to say, this is far easier said than done. The stresses which may have caused the parties to split up are now keeping them under the same roof. The tension, which has already escalated reaches an all time high and there is no immediate out.

But this doesn’t mean that the situation must escalate into a scene from “War of the Roses”. Here are a couple of ground rules which can, and should be followed in these situations:

1. Sell, even if it means selling out: If it simply isn’t financially feasible to maintain the house, it needs to be sold. Yes, the housing market is a dreary place for sellers these days, but there are situations where parties must simply cut their losses. Engage the services of a trusted realtor, accept their suggestions as to listing and selling prices and be willing to lower the price even further. The goal in these situations is to get the house sold as soon as possible, not to realize maximum profit on the investment. Sell at whatever price a buyer is willing to buy (and cross your fingers that the buyer can obtain financing).
2. Separate as much as possible: You still need to live with your spouse during this time, but it is crucial that both of you create as much personal space as possible and respect each other’s boundaries. One of you remains in possession of the master bedroom and the other takes over a spare room. Each of you is permitted to lock the door on your new “residence” and neither enters the space of the other. While this may be painfully reminiscent of your college dorm room days, keep in mind the situation is temporary and it’s the best you can do under the circumstances.
3. Communicate, as little as possible: Keep your communications limited to matters concerning children, if you have any and/or bills and expenses that need to be paid. Avoid any other topics- divorce and the reasons behind it, what your lawyer said to you today, what your friends/family think of your spouse, etc. If a discussion becomes heated, you both (or one of you if the other is unwilling) need to each go to your own rooms. If communication becomes impossible without strain or shouting, limit your communication to email only.
4. Respect your neighbor: If you were living with a roommate, you would be courteous and not play music too loud, be unnecessarily noisy in the early morning or late evening hours or question the activities of your roommate. The same rules apply to the present situation. Do not use this situation as an opportunity to goad your spouse into an argument or you will only make the situation worse.

The above is clearly not a good situation, but one that is becoming more common in the current housing market. In pending divorce cases, I have incorporated the above groundrules into agreed orders which was signed by a judge, which forces the parties to comply under penalty of sanctions. Sometimes it even works, although no one is particularly happy about it. It has, in some instances, encouraged parties to aggressively market their homes for sale.