Divorce usually has adverse effects on a person's financial situation--particularly in the short term. However, there are ways in which divorcing individuals can bounce back financially after divorce. The advice applies to all those who face financial hardship after divorce, both men and women.
Get involved in your investments, retirement planning, and insurance.
Many couples tend to split the financial decision-making. While one partner, usually the chief wage earner, focuses on investing and major financial decision-making, the other partner focuses on day-to-day budgeting and bills. After a divorce, it is usually the spouse who did not focus on the bigger picture who suffers most financially.
Establish personal credit and check your credit report for inconsistencies.
Many couples have a single joint bank account and credit card. In these situations, one spouse is usually not building up a personal credit history. Being an authorized user of a spouse's credit card does not build personal credit. Upon divorce, the spouse with no credit history will find it difficult to secure credit in their name.
Another common problem faced after divorce has to do with debt and their credit report. Since New Mexico is a community property state, debt, like assets, is divided equally during a divorce. It is important for individuals to check their credit report to ensure that their debt has been divided and allocated correctly by creditors, in accordance with the divorce settlement. It is extremely important to check for and rectify these mistakes as soon as possible.
Determine a budget.
Budgeting becomes of vital importance after a divorce. Both partners have to be realistic and consider multiple issues when organizing a budget. First of all, both partners have to have reasonable expectations. In most cases, the cost of maintaining two separate homes will prohibit both partners from maintaining their former standard of living.
In planning a budget, divorcing individuals should make a detailed inventory of their income, including income from work, alimony, investments, and child support. However, it is important to account for child support, and possibly alimony, ending at a certain point in the future. There should also be a detailed list of annual expenses, including rent, mortgages, insurance, car payments, taxes, utility bills, food costs, etc. If thinking about returning to school or pursuing some sort of career enrichment, it is necessary that individuals also factor this transition period into their budget. This includes accounting for an income reduction while in school and an income increase when the training is completed.
Children are an important consideration when making realistic budgeting choices. In some cases, the custodial parent wishes to keep the family home. However, this may not make financial sense. It is usually the primary caregiver who fights to keep the children as well as the family home. It is important not to make the decision to own the family home an emotional one, because it may be financially unrealistic.
Save for retirement.
Many individuals find themselves having to begin saving and planning for retirement from scratch after divorce. For various reasons during marriage, one or both partners may neglect to plan or save for retirement. But no matter how late or how difficult, retirement planning must be addressed as soon as possible. It may be best to start investing or saving even a small amount every month which can accumulate with time or, if possible, to take a lump sum received as part of the divorce settlement to begin a retirement fund.
Finally, many divorced couples neglect to separate their financial lives completely. As soon as the divorce is final, each spouse should ensure that assets are transferred to their name, as well as home and auto insurance policies. Individuals should also make sure that if they receive child and spousal support, then the paying partner has life insurance that will allow for a continuance of the support if they should die unexpectedly. It is also important to change beneficiary designations and to update wills and healthcare directives after divorce.
Even though divorce can be financially crippling, there are ways to get your financial life back on track. It is important, however, to get involved in your finances, be realistic, and make important changes that look toward the future. And if divorce is on the horizon, consult with an experienced divorce attorney early on to protect your financial interests.
March 2012 Archives
Divorce usually has adverse effects on a person's financial situation--particularly in the short term. However, there are ways in which divorcing individuals can bounce back financially after divorce. The advice applies to all those who face financial hardship after divorce, both men and women.
These days more couples are delaying marriage and many opt for living together unmarried. As more and more couples decide not to marry, but buy property and have children together, the process of breaking up has moved into the courtroom. New Mexico does not recognize common law marriage, although couples with a valid common law marriage from another state may be eligible to divorce here if they meet jurisdictional requirements. However, more and more couples are finding themselves dealing with a break-up in court than ever before.
In some states, couples who cohabitate for an extended period of time and "hold themselves out to be married," are granted all the legal protections and responsibilities of marriage through a common law marriage. New Mexico, however, does not recognize common law marriage. In New Mexico, to obtain the rights and responsibilities of marriage, like the right to community property, a couple must be formally married by a civil magistrate, judge, clergyman, or authorized representative of a federally recognized Indian tribe. This is true regardless of how long a couple has lived together or whether or not they have children.
Couples who were married under common law in another state and later moved to New Mexico may be the only exception. A common law marriage recognized in another state will generally be recognized in New Mexico for purposes of divorce, child custody and child support. Although these couples will first have to prove that they were indeed married under the laws of their previous home state.
However, many legal issues may still apply to break-ups between unmarried couples.
The trend in New Mexico, as in the rest of the U.S., is that couples are marrying later or not getting married at all. According to the U.S. Census Bureau, 45% of households in the U.S. in 2010 were unmarried. These couples often cohabitate for many years, acquire property and debt, and have children. What these couples may not realize is that not being married in New Mexico may complicate a break-up rather than make it easier.
While a family court will usually dispense with property, debt, and child custody and support matters in a single divorce decree, unmarried couples will have a longer, more complex road ahead of them. Common law couples cannot appear in family court for property division purposes because family court lacks jurisdiction over them. Division of property issues in these cases will be handled in civil court.
Even though New Mexico is a community property state, where both assets and debt are generally divided equally among spouses, there will be no community property claim unless there is a formal marriage. If property was acquired in a single name, the other party will have a hard time claiming ownership. The same rule applies to debt. If one party acquired debt in the form of a mortgage, car loan, or credit card, the other party will generally not be responsible for the debt absent a recognized marriage. If a couple is unmarried under New Mexico law, there will be no right to alimony or spousal support.
Issues pertaining to child custody in New Mexico are handled in much the same way regardless of whether the parents are married. However, there may be procedural differences that can be explained by an attorney.
In response to the trend of unmarried break-up disputes, several divorce attorneys have begun to advocate cohabitation agreements. Cohabitation agreements are legally binding contracts where couples can determine the issues pertaining to their property, debt, and parental rights and arrangements in advance. Cohabitation agreements can help avoid costly litigation should the cohabitation end.
Even though these agreements may not be the first thing to think about when a couple first moves in with each other, it may be wise to consider once the topic of joint property and children come up. And in moving forward, it may be a good idea as cynical as it may sound to seek the guidance of an experienced family law attorney.
The idea of an uncontested divorce is commonly misunderstood. The idea of an uncontested divorce is obviously appealing but not always practical or achievable. A distinction must be drawn between contested and high conflict. There is a very significant difference between the two.
Divorce is generally difficult; even an amicable divorce can become complicated. Since divorce is often a costly transition, many couples seek to cut expenses by pursuing an uncontested divorce. However, an uncontested divorce implies total agreement on a wide range of issues that may not be obvious at the outset. While an uncontested divorce may be the right choice to dissolve a short marriage with no children and few assets, it is not generally a good choice for longer marriages, especially if there are children, property, assets and debt involved.
To obtain an uncontested divorce in New Mexico, at least one of the spouses must have lived in the state for the previous six months. The parties then must prepare, agree upon and sign a Marital Settlement Agreement (MSA), which a judge accepts. After acceptance, the duties and rights in the MSA become legally binding on both parties. For a flat fee, some divorce attorneys will prepare and file all of the necessary documents for an uncontested divorce.
However, it is seldom the case that parties have reached perfect agreement on every issue that may be pertinent to their divorce. There are several issues concerning property division, child support, child custody, tax, and debt that couples may overlook when agreeing to an uncontested divorce. In trying to obtain a fast resolution, many couples often avoid important conversations and decisions, only to be forced to revisit these sometimes difficult and then more pressing issues in the future, resulting in far greater cost.
One of the most important issues couples must agree on is the division of property and debt. New Mexico is a community property state, where both marital assets and debt are divided equally upon divorce. In some cases, parties do not have a clear financial picture of their community property and may be agreeing to an arrangement that is not to their advantage. Many spouses may try to hide their assets to avoid giving their soon-to-be ex a fair share of the marital estate. A major issue is that in an uncontested divorce is that there is seldom discovery or disclosure of assets. If one spouse is indeed hiding certain assets, then clearly there is no real agreement on the division. And though a party can return to court to address the concealment of assets, it is a difficult and expensive process.
Child support is also a very complex issue in a divorce. If filing for an uncontested divorce in New Mexico, the couple must also submit a Parenting Plan with a child support worksheet. The Parenting Plan includes each parent's obligation for each child, which must comply with the New Mexico child support guidelines. Couples considering an uncontested divorce should also come to an agreement on custody, the possibility of one parent moving to another state, medical costs and insurance premiums, and educational costs. These can quickly cause an escalation of conflict when they have not been properly addressed.
Debt is an issue all its own and unfortunately, the debt often far exceeds any assets the couple may have.. In community property states like New Mexico, both spouses are equally responsible for debt acquired during the marriage, regardless of which spouse actually incurred the debt. As noted above, since there is usually no discovery or mandatory disclosure of finances in an uncontested divorce, it is important for both spouses to know the size of their debts both collectively and individually.
While uncontested divorce may seem attractive and less costly, it is often not the right choice. Some may wish to just get it over with which is certainly understandable in light of the stress of divorce. However, rushing through the process often leads to far more stress and costs in the future. Contested does not mean conflict. It may simply mean thoughtful and careful. Once it is done, it is very difficult to undo. Consulting an experienced divorce attorney before the process begins, even for an uncontested divorce, may cause avoid complications and costs in the long run.
Child custody disputes in New Mexico can involve many special circumstances that may not commonly arise in other states. For instance, given the large Native American population in New Mexico, a number of the children caught in custody disputes may be Native American. New Mexico is home to 19 Pueblos, two Apache tribes, and a large portion of the Navajo Nation. In addition, many Native Americans live off reservation throughout the state, concentrating in Albuquerque, Farmington, and Gallup. According to the US Census Bureau, in 2010 an estimated 9.4% of New Mexico's population was American Indian. Custody disputes involving Native American children have several important implications of which all parents need to be aware.
Under New Mexico law, child custody proceedings involving Indian children are governed by the federal Indian Children Welfare Act (ICWA). Congress enacted ICWA in 1978 as a response to the overwhelming placement of Indian children in white foster homes and the perceived destruction of Indian culture. ICWA gives tribal courts exclusive jurisdiction over some cases and places procedural safeguards to ensure that if custody matters are litigated in state courts, the tribe has notice and an opportunity to participate in the determination.
Under ICWA, tribes have exclusive jurisdiction to decide custody matters concerning Indian children that reside on the reservation. If children do not reside on the reservation, the matter should be transferred to tribal court unless the tribal court declines jurisdiction or the parent objects to the transfer. When custody proceedings are held in state courts, both ICWA and New Mexico law mandate that the child's custodian and tribe be given notice of the proceedings. In state courts, ICWA places higher and different standards of evidence on proceedings involving Indian children. Furthermore, the child's custodian and the tribe may intervene at any point in the proceedings.
ICWA also gives tribal court decisions full faith and credit, meaning that any decision by a tribal court will carry the same weight as a decision from any other state court. Other requirements include preferential placement with extended family, other tribe members, and other Indian families when deciding adoption cases. ICWA also mandates safeguards for when an Indian parent wishes to relinquish parental rights, including giving the custodian and tribe notice and a mandatory court appearance where a judge explains the consequences of relinquishing rights as a parent.
In order for ICWA to apply the following circumstances must exist: (1) the proceedings must be "child custody proceedings," which include adoption, termination of parental rights (TPR), and foster care; (2) the child must be a member of a federally recognized tribe or (3) the child must be eligible to be a member of the tribe and have a biological parent who is a tribe member.
If a child custody case is transferred to a tribal court, there are several important facts that parents must be aware of. Even though it is difficult to generalize, there are a number of significant differences between state and tribal courts. For one thing, to argue a case in many tribal courts, including Navajo courts, attorneys must be specifically admitted to practice before the tribal court. Additionally, tribal court judges may or may not be attorneys themselves. Tribal court judges are often members of the tribe who are sometimes elected and at other times appointed by tribal councils. Most tribal courts follow tribal codes, which may or may not be written. Moreover, tribal courts are not bound by the decisions of US state or federal courts and follow their own precedent.
Child custody issues are complex, emotional and often highly contentious. New Mexico child custody laws are even more complex if there is a chance that the proceedings involve a Native American child. When involved in any type of child custody matter in New Mexico, it is important to consult an experienced family law attorney to help guide you through the process.
The Pew Charitable Trust recently published the results of its Economic Mobility Project (EMP) study. The study's findings of women's economic situation after divorce were interesting and encouraging. According to Pew, women today are more likely to come out of a divorce as financial winners than they were in the past.
The study was based on non-partisan data and was intended to spawn a discussion about individuals' ability to move up or down the economic ladder, as well as how government and private organizations can offer better economic opportunities to encourage upward mobility. Part of the study focused on the impact of divorce based on gender.
The EMP results show that 20% of divorced women's income will increase by 25% or higher after divorce, which is almost double the increase of only 11% in the early/mid 1970s. In contrast, only 16% of divorced men's income will increase by 25% or higher after divorce. This figure is also up from 14% in the early/mid 1970s. On the other hand, around 50% of both women and men are financially worse off after a divorce.
Commentators assert that these figures reflect a broad change in women's financial position and strength, for which there are several factors. One important reason is that the wage gap between men and women is closing. Women are also getting better education than women in the 1970s, which is leading to better, higher-paying jobs. Another factor is that women are more informed than ever of their marital assets. In the past, many women were unaware of their marital income, debt, and property. In contrast, women today have become more involved in family finances, thereby strengthening their position during divorce.
Family law attorneys have also reportedly seen a large percentage of women seeking prenuptial agreements. This was rarely the case 30 years ago. Today, women are getting a better education, better jobs, are waiting longer to get married and, thus, are accumulating more personal assets prior to marriage. Taking their cue from men, these women have sought better ways to protect their own wealth, with many turning to the prenuptial agreement.
The study also raises the question of what married couples can do to ensure that they do not suffer as much economic damage in the event of a divorce. Even though planning for a divorce while happily married may not be fun or seem necessary, it may end up meaning the difference between financial success and economic crisis in the future.
- Know the law in your state. New Mexico is a community property state. In New Mexico, any income, property, or debt accumulated during the marriage is generally divided equally among the spouses upon divorce.
- Be aware of marital income and property. Even though in many situations one spouse is often the sole or majority income-producer, it is important for both spouses to know the value and nature of family income and investments.
- Keep an eye on debt. Marital debt is an important topic in New Mexico. In New Mexico community debt is usually divided equally upon divorce. This may be true even if only one spouse acquired the debt, only one spouse has an income, or the other spouse was unaware of the debt. Therefore, in community property states like New Mexico, it is even more important for both spouses to be aware of all debts accumulated during the marriage.
- Establish credit. Many spouses, for several reasons, do not have a credit card in their name. When faced with divorce, some individuals find that they have not established sufficient credit to accomplish even the simplest tasks like obtaining a telephone line or renting a home. Even though divorce may not seem like a possibility, it is important for both spouses to have a personal credit card and to establish a credit history.
Although studies like EMP show that women are doing far better after divorce than they were 30 years ago, it is important to realize that women are faring better because they have taken steps to protect themselves and their assets in the event of divorce. Nobody goes into marriage thinking that they will ultimately separate. However, a little common sense planning now can go a long way in the future. And if divorce is unavoidable, women and men alike would do well to seek the advice of an experienced divorce attorney.
For many facing economic hardship, bankruptcy may seem like an attractive option. Filing for bankruptcy often results in the elimination, or discharge, of a large variety of debts and often represents a second chance for those mired in overdue bills. However, some debts, including alimony and child support, are not discharged in bankruptcy.
Some people find themselves faced with the possibility of bankruptcy as a result of tough decisions and money management choices. Others find themselves in insurmountable debt due to forces beyond their control, like a serious illness, unexpected accident, job loss, or some other crisis. Bankruptcy laws and procedures try to balance the need of debtors for a new beginning with the interests of creditors in recovering their money.
Divorce can often lead to bankruptcy as a person finds him or herself unable to pay their debts or support two households on a single salary. Other spouses may try to avoid alimony and child support obligations by filing for bankruptcy. However, for important policy reasons, filing for bankruptcy will not discharge most domestic support obligations, including alimony.
There are two main types of bankruptcy relevant to this discussion, Chapter 7 and Chapter 13. Under Chapter 7 bankruptcy, debts are discharged; under Chapter 13, debts are only discharged after the debtor has paid a portion of what is owed. When a court orders a discharge, the debt is eliminated and creditors have no legal right to collect against the former debtor. However, neither Chapter 7 nor 13 discharge all debts.
The Federal Bankruptcy Code 11 USC § 523 exempts the discharge of "domestic support obligations" as well as debts owed to a former spouse or child acquired as the result of a court-ordered separation agreement or divorce decree. Moreover, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), effective October 2005, gives domestic support obligations priority over other creditors, including tax debts. Domestic support obligations under BAPCPA include property distribution, alimony, child support, and other court-ordered debt incurred as a result of a divorce and separation. Domestic support obligations are automatically exempted from discharge in bankruptcy.
There are a few requirements for discharge to be exempted from bankruptcy proceedings: (1) the obligation had to have arisen out of a separation agreement, divorce decree or other order by a court, (2) the obligation must be in the nature of support, maintenance or alimony, and (3) if the obligation is to a third party, it must have the effect of supporting the former spouse. This includes paying a mortgage, child education, child medical expenses, and life insurance premiums where the child is a beneficiary.
There are a few differences in the possibility to discharge domestic support obligations between Chapter 7 "liquidation" and Chapter 13 "reorganization" bankruptcy. Under Chapter 7, virtually all obligations assigned under a separation agreement or divorce decree are not dischargeable. This is true whether the obligations take the form of support, property division, or other agreements. Under Chapter 13, a former spouse may not discharge past due support obligations and must pay these obligations in full during the duration of the Chapter 13 plan. The only obligations that may be discharged under Chapter 13 are those deemed not to be in the nature of support. Since most alimony and child support obligations are generally indeed in the nature of support, it is difficult to discharge any of these debts under Chapter 13.
Even though bankruptcy may make financial sense for other reasons, it is very difficult to use bankruptcy to discharge alimony and child support obligations. If a former or soon-to-be former spouse is planning on filing for bankruptcy, it is important to contact an experienced family attorney who will be able to guide you through the process of obtaining relief from a bankruptcy court.
Today it seems like many people live their lives on their smart phones and through social networks. Many could not imagine a day without texting on their cell phone or updating their status on Facebook. However, for an individual facing divorce or child custody dispute, when not managed properly a digital trail can be a serious liability.
What many do not realize is that activity on Facebook, Twitter, and MySpace can often be used as evidence in many family law proceedings, including a divorce or child custody proceeding. Increasingly, people have found their posts, status updates, pictures, and comments used to contradict their statements in court and as evidence of poor judgment, drug and alcohol use, and spending habits. A survey by the American Academy of Matrimonial Lawyers (AAML) found that 81% of attorneys saw an increase in cases last year using evidence obtained from social networks, with Facebook being the most widely cited.
Beyond social network activity, phone messages can be used in similar ways. Texting and other activity on smart phones leaves a digital trail that can be used in a custody, child support and divorce proceeding. For people who constantly communicate via text, their text messages can provide a written record of what they were doing, thinking, and planning at any given moment. Another survey by AAML found that 92% of attorneys saw a rise in the use of evidence taken from a smart phones and 94% saw a rise in the use of text messages as evidence.
Spying and snooping can also pose a significant risk. For a divorcing spouse, nothing can be more tempting than taking a peek at their ex's email account or web history. However, even if it is a shared computer, snooping can have very serious consequences. In New Mexico, privacy laws prevent an individual from reading, copying, or intercepting communications by telegraph or telephone meant for another without the consent of the sender. 3-12-1(C) NMSA 1978. Like many states, the New Mexico law does not specifically cover email, but there are signs that the law is likely to catch up soon. Even though the issue is still being debated, a man in Michigan is currently facing felony charges for accessing his wife's Gmail account during a divorce.
Joining a dating site while in the process of obtaining a divorce may also be counterproductive. Most divorce attorneys discourage dating in general before a divorce is finalized. Apart from the added stress that bringing another person into the relationship entails, dating before a divorce is final could have detrimental effect on an individual's case, affecting issues of property division, spousal support, child custody, and child visitation.
Even though retail therapy may seem like a harmless way to relax in a stressful period, many divorce attorneys also advise against it. Sometimes spouses go on shopping binges with marital assets to get revenge on their exes. This tactic, however, often backfires, increases debt, and adds stress to an already stressful situation. A spouse's overspending can sometimes be used by the opposing spouse as evidence of mismanagement of marital funds and can be harmful in disputes over support and child custody.
Divorces and custody disputes can create an extremely contentious situation, where private matters are brought forward and scrutinized. It is more important than ever to realize that in a connected age, people leave an increasingly detailed digital trail which may end up in front of a judge.
These are all issues that you should be discussed with an experienced divorce and family law attorney early on in a divorce or custody proceeding. It is far easier for your attorney to address these issues in a proactive manner than to learn about them from the other side at what will likely be very inopportune times.
It is no secret that divorce is a difficult time, and it is widely known that child custody battles can be life-altering experiences--not always in a good way. More and more, courts have intruded into otherwise personal and family affairs in order to make child custody decisions. For example, a recent Washington Times article discussed the growing trend of family law courts considering smoking a factor in child custody cases.
The investigation cites a survey by the group Action on Smoking and Health, dealing with custody issues and tobacco use. The survey found no court has ruled that a parent's use of tobacco should not be taken into account when deciding child custody. It also found that courts in 18 states have already ruled that tobacco use of a parent or family member should be considered as a factor in child custody cases. Other courts have prohibited smoking in a child's presence or even 24 to 48 hours before the child arrives. Courts have also modified custody arrangements because a parent exposes the child to tobacco smoke. They have taken into account not only parental smoking but smoking among other family members and friends that may expose the child to secondhand smoke.
The Times article also discusses how many who oppose this trend warn that considering a parent's smoking habits will pave the way for further court intrusion into private matters. Some fear that if the court is regulating a parent's smoking habits by citing the dangers to the child's health, it may go on to regulate other private matters such as what a parent feeds their child and other private parenting decisions. Other critics question whether the courts should be allowed to limit a person's freedom of choice in order to see their children.
When determining child custody, a court looks at "the best interests of the child." This standard includes the child's medical health and well being. The risks of tobacco use and secondhand smoke, especially to a child's health, are widely documented. In the wake of strong anti-smoking campaigns, it is only natural that courts are now considering a child's exposure to secondhand smoke as part of its "best interests" considerations. This is especially true if the child already has respiratory problems, but has been held to be relevant in a wide range of cases, even when the child shows no sign of reaction to exposure.
It is already evident that parents have begun to change their habits in response to this trend. Many parents have quit smoking when faced with a possible child custody dispute. It is not clear that quitting may help, however, since the opposing parent may argue that the other will just resume smoking after the child custody matter is settled. If a parent is unable to quit, he or she may be well served by only smoking outdoors and never around their children or in a vehicle. Parents may also help their custody case by not allowing others to smoke around their children.
In any event, this trend reflects courts' increasing control over the personal decisions of parents in child custody disputes. Today's parents are beginning to realize that they must give up control of many previously private matters when they become involved in a dispute over child custody. These are the kinds of issues that should be addressed with an experienced divorce attorney so that you know what to expect in a divorce and a contested child custody case.