Financial Aspects Of Divorce

A divorce may save you heartache, but what about the financial cost?

Probably the single biggest cause of divorce is money. Spiralling debts – or even a simple difference of opinion as to whether to shop in Tescos or Waitrose, Primark or Prada – can send blood pressure soaring and feed stress.

But making the difficult decision to go for a divorce can also have financial implications, particularly where you and your spouse are at loggerheads.

So how is it decided who gets what in a divorce settlement?

It pays to remain friends
It is always advisable to try and reach a financial settlement with your spouse on a voluntary and amicable basis.  If you can talk things through calmly and rationally, you’ll be saving yourselves a lot of time and money that otherwise will be needed to fight it out in court.

If you and your spouse are able to reach an agreement, then your solicitor can prepare a formal and legally binding document embodying the terms of the agreement.

Click here if you would like to receive FREE advice from a fully qualified solicitor.

 What if we can’t agree?
If direct negotiations are not possible, your solicitor may arrange for you both to attend ‘mediation’ with a specialist third party mediator – a more informal, cheaper, quicker and less intimidating experience than going to court. (There is a separate guide to mediation contained on our website.)

But, if all else fails, your respective solicitors will become directly involved with the negotiations or, as a last resort, issue proceedings in the court for a Judge to determine how the financial arrangements should be resolved.

Making an Application to the Court is relatively straight forward and involves a modest court fee. 

Bear in mind that it is still possible for you and your spouse to then make a voluntary agreement.  In fact, often the issuing of proceedings can help to break the deadlock by putting pressure on both of you and forcing you to focus your minds.

Once we’ve managed to sort out who gets what, is that it?
Even if negotiations are proceeding on an amicable basis, any agreement between you must detail a financial settlement that the Court finds acceptable too. 

In the majority of cases, your solicitor will recommend seeking the Court’s approval of the settlement as, otherwise, in certain circumstances, either you or your partner could still change your minds and walk away from the agreement.

How does the Court decide what’s fair?
The Court takes various matters into account when considering whether to approve an agreement made on a voluntary basis including:

The income earning capacity, property and other financial resources which each spouse has, or is likely to have, in the foreseeable future, including any potential increases in the earning capacity of either of you;

1. The welfare of any children of the family under the age of 18;        

2. The financial needs, obligations and responsibilities which each of you has or is likely to have in the foreseeable future;

3. The standard of living enjoyed by your family before the breakdown of the marriage;

4. The ages of both you and your spouse and the duration of the marriage;

5. Any physical or mental disability suffered by either of you;

6. The contributions which each of you have made, or are likely to make in the foreseeable future, to the welfare of the family – including any contribution by looking after the home or caring for the family;

7. Where relevant, yours and your spouse’s behaviour;

8. The value to each of you of any benefit which one of you will lose the chance of acquiring because of the divorce (most usually pension provisions).

Taking all these factors into consideration, the Court’s objective is to achieve a fair settlement.

What about child maintenance?
In most cases the Courts no longer have power to make orders for child maintenance and an application to the Child Support Agency has to be made for child maintenance to be assessed. 

However, if child maintenance can be agreed between you, then it can be included in a Court order.  Your solicitor will be able to advise you on the likely level of child maintenance.

What happens if I don’t tell the truth about my finances?
Whether negotiations occur voluntarily or proceed through the court, there is an absolute duty for both of you to fully disclose your financial positions. 

Failure to do so could invalidate any agreement or order.

How long will it take for the Court to make a decision?
Once the application is made, the Court will apply a strict timetable.  The Court will initially set a date for a First Appointment approximately 12 to 16 weeks after it issues the Application for Financial Provision. 

You will have to attend that hearing.  Sometimes, where appropriate and following an application by either party, the court may make an ‘interim order’, for example, providing for one party to pay maintenance to the other.

Full disclosure of each party’s financial circumstances must be given before the first appointment and the Court must be given a statement of the issues relevant to the financial application.

Financial disclosure is achieved by simultaneously exchanging a document called Form E.  This must be done at least 35 days before the First Appointment. 

What kind of financial information will I need to provide?
Whether disclosure is made during amicable and voluntary negotiations or as part of the Court process, the sort of information that has to be disclosed is as follows (although this list is not exhaustive):-

1. Recent mortgage statements;

2. Copies of any valuation obtained on any house or other property in the last 6 months;

3. Copies of statements covering the last 12 months in respect of every Bank, Building Society or National Savings Account which are held, either in your sole name or jointly with another;

4. Surrender value quotations for all insurance policies;

5. Copies of your last 3 payslips and your most recent P60;

6. Pension valuations; including the cash equivalent transfer value;

7. Copies of the last 2 years accounts for any business;

8. Details of any debts or liabilities;

9. Copies of credit/store card statements;

10. Details of all other assets/investments;

11. Details of inheritances likely to be received in the foreseeable future.

What happens next?
The first hearing is usually used as an opportunity for the Judge to identify the issues and to decide how the case will proceed. 

The Judge may, for example, require either of you to obtain further information about assets or liabilities. 

The Court will then usually fix a date for a Financial Dispute Resolution Appointment.  Both parties must attend that hearing as well.  The purpose of the hearing is to see if the case can be settled without going to a full trial. 

The Judge will try to assist you in reaching an agreement and will usually give an indication about how he believes the Court will deal with your case if it went to trial. 

If no settlement is reached then the Judge will give directions for a final hearing which, again, both of you  must attend, and at that hearing the Judge will make a final order which will resolve the financial dispute between you.

So, as you can see, there is quite a lot involved to achieving a financial settlement. But one thing’s for sure, the earlier you can get good professional advice, the better.

Click here if you would like to receive FREE advice from a fully qualified solicitor.