Breaking Bonds, page 20
Some things that affect valuations include the financial condition of the company, goodwill and other intangible assets, poor collection rates for receivables, nonrecurring items, buy/sell agreements, liquidity, and restrictions, among others. Sit down with your attorney and the independent business appraiser and discuss the appraisal in detail to make sure that you understand it and agree with it. You may even want to get a second opinion.
If you must accept a note for the buyout of your husband’s business, make sure that you get collateral to back the note, either a lien on business assets or real property. It is preferable to get a lien on real estate (real property), as it is fixed in place, and cannot be sold out from under you, unlike inventory or equipment.
You will be able to force a sale of business assets if he does not make the agreed-upon payments. You do not want to be an unsecured creditor if the business runs into trouble.
Better yet, if there is cash available to buy you out at a fair price, take this instead. If there is no cash available, try to get him to take out a loan to buy out your share. If not, you will likely have a problem later getting paid and you might have to take your husband back to court. That will cost you more money—money that you may not have.
You will be much better off if you do not continue to be a partner with him in anything.
BIRD IN HAND
“Personal experiences affect the facts judges choose to see.”
―SONIA SOTOMAYOR
We have all heard the saying “a bird in the hand is worth two in the bush.” In any settlement, you need to consider the time value of money. Any money that you have right now is worth more than the money you are promised in the future because the money you have right now could be invested and earn interest or grow. So, in the division of assets, you will have to discount payments promised to you in the future to the level of their present value.
Inflation, which is the increase in the cost of things from one year to the next, reduces the purchasing power of cash value over time. Thus, time value and the anticipated rate of inflation are very important factors in determining present value, as well as the rate of return that your money could have earned if it had been paid as a lump sum to you in the divorce. A certified public accountant will usually do a valuation.
There is also the question of opportunity cost. You don’t have the opportunity to spend cash or invest it now if you don’t receive it until some later date. Not having the cash in hand (being illiquid) reduces your flexibility. Therefore, if you do agree to receive payments over time, make sure that you get enough cash in the settlement for emergencies or other anticipated major expenses. Keep in mind that in making this decision you may not ever get those future payments. Your husband may make that very difficult, if not impossible.
Remember the character of the man making the promise. An abuser is not to be trusted and is likely to stop making payments just out of the need to control or for spite. You will then have to take him back to court to get the money. You may not be able to afford to the expense of taking him back to court, and he may be counting on that.
Also, what if he loses his job or his business goes sour, and he is then unable to make the payments as promised? Think long and hard before you agree to take payments over time.
Your attorney may not have the same perspective as I do regarding the reliability of abusers if he or she has not had the experience of dealing with a psychopath or narcissist personally. In my experience, it is usually better to receive less money now than promises that will be very difficult to enforce. If you can’t trust him now, how are you supposed to trust him ten years from now with your financial future? If it is at all possible, insist on getting cash in your hand now!
GET IT
“Distrust and caution are the parents of security.”
―BEJAMIN FRANKLIN
Insist that your ex-spouse’s wages be garnished for child support and alimony or you may never see it. He probably will not make all payments on time or even at all unless he is compelled to do so. He may selfishly try to punish you by withholding money needed to support the family.
Many states automatically require wage garnishment for child support, but this can be bypassed with a legal agreement if you give your consent. Do not agree to this under any circumstances, and do not fall for the excuse that the reason not to garnish wages is that it would be embarrassing to him or might get him fired from his job. You may end up not receiving support for years, if ever, without the garnish. Please don’t worry about his feelings. He didn’t worry about yours while he was abusing you. Many companies already garnish the wages of some of their divorced employees, so don’t fall for this tactic.
I recommend you keep a spreadsheet of every child support payment due you, noting when each is paid and the running balance.
Keep another spreadsheet for medical reimbursement requests, which includes the date a request is sent for reimbursement and when it is paid. Send you ex-spouse such bills via certified mail or priority mail so that you have proof that they were received.
Be sure to keep copies of any bills sent to your ex-husband and keep a running balance of what he owes on them. Stay well organized so that you can give all the proof you need to your attorney and the judge in case you find it necessary to take him back to court.
HELP!
“It’s not about perfect. It’s about effort.”
―JILLIAN MICHAELS
Temporary Assistance for Needy Families is a wonderful government resource that assists women financially to care for their children if deserted by their father or if the father dies. It is there for you to take advantage of, on behalf of your children, if you qualify for it (see Resources).
The most important thing to consider right now is providing for your children’s care, so please view it as a necessary measure to survive rather than as a handout. We all pay taxes on our earnings to provide a safety net for people who are temporarily suffering through hard times. That is why it exists.
If I knew you personally, I would reassure you that I feel it is my moral obligation to pay taxes to help other women who are suffering so that they may feed their children and to empower them to get back on their feet after a divorce or the death of a spouse. If you have too much pride to ask for help for yourself and your children, you deny me, and others like me, the opportunity to help someone in need. Give us this chance to give you a helping hand, and provide your family with the assistance that you need and deserve. Open your heart and be willing to receive support from others. Difficult circumstances can happen to anybody.
If you qualify for aid to dependent children because your husband is not making his child support payments, be aware that most states have computerized data sources to locate a missing parent. They then use various enforcement methods, such as wage garnishment or intercepting tax refunds, to collect what is due. Your ex-husband even could get arrested and spend a night or two in jail to compel him to live up to his obligations. You will have to sign a form authorizing the state to get reimbursed from your husband if your children are to receive state aid. Sign it without hesitation.
The money is coming from government funds when he should be making the payments. He has a legal and moral obligation to support his children, so do not feel sorry for him or allow him to shirk his duty to support them. For more information, contact your local Health and Human Services office (see Resources). The HHS office can also give you information on food assistance programs. Do whatever you must do to survive.
I do not recommend that you hire a private child support collection agency, as their fees can be very high, up to 35 percent of payments, even for payments that come in which they did absolutely nothing to collect. Their contracts are notoriously difficult to terminate. Essentially, you will have to gather and give them the same information that you would give to your state agency for their search.
By contrast, your state will probably charge a 5 percent or less administrative fee, and most states are efficient in using computerized data sources to track down deadbeat fathers. (For more information, see Resources.) If your state is unable to locate your ex-husband, try hiring a private detective.
NOT MY BUSINESS
“I thank God for my failures, maybe not at the time but after some reflection. I never feel like a failure just because something I tried has failed.”
―DOLLY PARTON
It is not legal in many states for a spouse to start a new business during a divorce proceeding. Please be sure to check with your attorney about laws in your state if your spouse starts a risky business that could put your financial future in jeopardy and subject you to substantial additional debt. I had to get a temporary restraining order (TRO) when my husband mentioned that he had started a new business venture and that he had committed to invest a substantial amount of money that he didn’t have. His plan was to expand the business dramatically during the divorce by ramping up production and taking on a lot of debt. He figured the timing was good because he could make me pay for it against my will. He had lost large amounts of money in the past, and the risks of this project were huge.
Even though I told my ex-husband that what he was doing was illegal, he refused to stop the project. He had committed to the purchase and installation of a very large and expensive piece of equipment to get the business started. As soon as I found out about this purchase, I immediately called my attorney to get a restraining order. I also had the presence of mind to call all the vendors in Florida to find out where he had made a substantial deposit. I found the vendor, who was antagonistic to me even after I explained that I was a co-owner in the business and that my husband had illegally committed to buying the equipment from him during a divorce proceeding. He rudely told me that it was not any of my business. I then informed him that he would not be paid if he made delivery and that I was merely giving him a courtesy call to inform him that I was planning to fax him a copy of the restraining order the next day. He changed his tone with me immediately and thanked me for the call. He did not deliver the equipment.
My ex-husband and I both suffered equally financially from the loss of the deposit, which was not fair to me because he made the payment illegally. However, I would have lost a whole lot more than that if he had continued with the project. I might have ended up in bankruptcy court because of bad investment decisions he was making even after I had filed for divorce. He was aware that a bankruptcy would have affected my reputation, and that could have wrecked my career as a financial advisor. I believe vindictiveness was involved in his choice to engage in risky behavior, as well as incompetence and an outsized ego.
To make matters worse, his attorney filed a petition to have the restraining order set aside, only to drop it after conferring with my attorney while we were waiting outside the courtroom. This move was very costly for me, as well as for my ex-husband. His attorney should have known before filing the appeal that his client was breaking the law. Instead of researching the matter beforehand, he chose to take me to court instead, which was a waste of my time and racked up additional legal fees for both of us from our attorneys. My ex was furious with me, even though he was the one who had behaved unethically.
In the state where I live, one party to a divorce is responsible for debts incurred by the other party until the time that the divorce is declared final. Unfair, but this meant I was responsible for debts that my ex-husband incurred after I filed for divorce until such time that the judge signed the divorce decree.
The underlying point here is that you must act to protect yourself wherever possible. Keep an eye on your husband during and after the divorce. If you don’t, this lesson will keep turning up in your life until you finally learn it. Some people never do, and they stay in the role of unhappy, passive victims their entire lives. This is not what you want for yourself or your children.
MUCH OBLIGED
“Credit card interest payments are the dumbest money of all.”
―HILL HARPER
Debt can be a real minefield. Creditors don’t care which partner in the settlement is supposed to pay off the marital debts—they just want to get paid. A court order does not affect your obligation to a creditor if you also signed for a loan. They will go after you to pay the loan if your ex-husband doesn’t. This kind of obligation includes, but is not limited to, income and property taxes, mortgage payments, car payments, and credit cards.
I received a notice shortly after my divorce was final that several checks had bounced on a joint checking account that my husband had set up online. The bank informed me that I was responsible for paying those checks even though I did not authorize the account. To protect myself, I took a copy of my divorce decree to the bank and demanded to see the bank manager, who reluctantly removed my name from the account. When I confronted him, my ex-husband said it was all a big mistake. But in my opinion, he knew exactly what he was doing.
Follow up after the divorce to make sure that your name is removed from all your husband’s bank accounts in case he bounces checks so that you are not held liable for them.
Avoid keeping assets secured by loans that he is obliged to pay for over time, as he may fail to continue to make the payments. If you are to get the car, either refinance it exclusively in your name, or make the car payments on your own if the ownership is left in both names. Make sure that your divorce decree specifically protects you from your ex-husband’s debts or you may be legally responsible for paying them if he files for bankruptcy, even after you are divorced.
It will be helpful to include an indemnity provision in the divorce decree that gives you the right to sue your ex-husband to reimburse you for debts that you paid that were rightly his. But remember that it will be expensive to take him back to court, and there is a possibility that he may no longer be able to pay his debts. Try to minimize the risk of this as much as possible by dividing the debts in a way that protects you as much as possible in the divorce agreement. Also remember to request that a provision be included that states that joint assets will be used to pay off all joint debts completely before being divided and distributed to you and your husband.
If your husband is keeping any real estate and you are unsure if he will be able to refinance the property exclusively in his name, make sure that your divorce decree states that the quitclaim deed for the home that you will be required to provide him will be held in escrow by your attorney or the closing agent until the refinancing actually takes place. Otherwise, if he fails to close, your name will remain on the debt while you will have signed over your ownership rights in the property. He will then own the property outright while you still owe his mortgage.
Make sure that the divorce decree states that he must obtain financing in his name, if needed, within a specified period, such as ninety days. If that is not done on time, the decree should state that the property will be auctioned and the mortgage paid off.
If the mortgage is left in both names, you will be required by the lender to pay if he doesn’t, and it will affect your credit rating. Even if he does make timely payments on the mortgage, it may be very difficult for you to buy a home in your name alone after the divorce, as the loan will show up on your credit report as your debt and will affect your ability to borrow additional funds of your own.
Before you decide to keep the home, check with your bank to make sure that you will be able to qualify to refinance the mortgage in your name. If you don’t qualify, you must reconsider. If you and your husband decide that the property is to remain in both your names so that the children can be raised in the family home, make sure that it is in the decree so that you do not have problems later with the IRS. If you sell the property within six years of the divorce, transfers between spouses are not taxable.
I think that this is a terrible idea, as it means that you will continue to have a lot of contact with your former abuser. Decide what is important to you and your children. Your home is wherever you and your children are; it is not a physical house. It may be much better for you to start somewhere new anyway, in a place where you don’t have bad memories.
If your husband files for bankruptcy, he will still be obligated to pay alimony and child support, but the amount may be modified in bankruptcy court. If he is unemployed and can’t pay, he may go back to court and get the amount of spousal support modified to account for his reduced income. The court cannot make any change retroactive to before the date he files a request for modification, so each month he delays filing is another month he owes you the old amount.
If you filed joint income tax returns and owe back taxes, or you get audited within three years of filing a return and are assessed additional taxes, the IRS can come after both of you for all the taxes, regardless of what your divorce decree states. If you are married for an entire calendar year during the divorce proceeding, you may decide to file joint returns or separately for that tax year.
I filed my return separately during the divorce as soon as I found out from the business appraiser that my husband had misrepresented information on his business tax return. I was not willing to sign a tax return “under penalty of perjury” when I suspected that he might be cheating on his taxes. My ex-husband was angry because it cost him more to file separately than jointly with me, but that didn’t bother me at all. I was divorcing him and intended to protect myself.
If you are concerned about your husband being untruthful on tax returns that he filed when you were together, make sure that the divorce decree holds him solely responsible for any income taxes, interest, or penalties assessed for prior year tax returns after the divorce.
