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Archive for the ‘Debt’ Category

In a Divorce, Don’t Forget the Details

Posted on September 21st, 2016 by The Red Headed Lawyer

in-a-divorce-dont-forget-the-details

If you look up “what are the most stressful life events,” divorce is second – right behind death of a spouse.

In some ways both are synonymous. Each involves a death of sorts, and there is something else these events have in common. Both will require you to make critical, potentially life-altering decisions at a time when your mental capacity is taxed by stress. But in both cases, the decisions will need to be made quickly and thoughtfully, because most will be irrevocable.

Everyone can list the major decisions involved in a divorce:

  1. Child custody
  2. Disposition of marital home
  3. Visitation
  4. Support payments
  5. Division of major assets/liabilities

These have to get resolved and they are on everyone’s radar from day one. But in the heat of “battle,” don’t lose sight of those other issues that, if left unaddressed, can cause additional expense, emotional pain, and wreck havoc with future relationships.

Credit Cards

Chances are, if you’ve been married for a number of years you have joint credit cards with your spouse. It is often simpler to pay these off before the divorce heats up. It doesn’t really make sense to have your attorney negotiate with opposing counsel over a $300 Target balance, but if you forget, it will need to be on the table. And even when there is no balance, if the card was issued jointly it could be a problem down the road. Call the company to determine how you can remove a currently authorized user. Sometimes it’s fairly easy and sometimes not, but it must be done. Remember that removing a user is better than closing an account completely for credit score purposes, but sometimes you won’t have a choice.

Utilities

This situation will be similar to the credit card scenario. Utilities (including phone, cable and Internet) are often joint obligations. Obviously, whoever is to remain in the house needs to have the control and the liability. So check them – the departing spouse should assure that he/she is no longer connected to the utility accounts. You may to have to jump through a hoop or two to remove a name, but it will be worth it.

Club Memberships

Some club memberships include a credit account. Even if yours doesn’t, at some point you’ll need to separate yourself from your ex so Sam’s, Costco, and others treat you as an individual with (in same cases) a new address. Besides, do you really want your ex to know about your shopping habits?

Netflix, etc.

This can become an issue, particularly if it’s not resolved early before things get heated. Consider what might happen during a custody battle if your viewing habits suddenly became public information. It might be embarrassing, or it could (depending on what you watch) become a morals issue used against you in court to take away your child(ren.) Tread carefully during custody discussions – you don’t want anyone to think your home activities create hazards for children.

Gag Orders

It is common in a settlement agreement to include language stating that one spouse cannot slander or speak badly of the other. This is usually to maintain the relationship with a child or children. But don’t forget that slander can apply to others. What if your ex-spouse decides that his or her new favorite activity is bad-mouthing the person in your current relationship? It’s hard to prove in court, but the parties will know exactly what is happening. Unless it is prohibited, either specifically in the document or by some broader statement, a situation could develop where your friends, relatives, and kids become a sounding board for your ex’s complaints and comments. Don’t let this happen – be sure you protect yourself.

There are many more areas of entanglement that must be severed prior to divorce. Go through your wallet or purse and look at everything – chances are you will find more. Gym memberships, anything that is autobilled like yard service, reward program points – the sooner you address these the better. By paying off bills, separating or closing joint accounts, dropping users, and protecting yourself from torment, you save time and money during your divorce. It is also easier to resolve these issues early before emotions take over.

Feel free to contact us if you have any questions on settlement agreements or divorces.

Why Should I Opt for a Divorce Instead of a Separation?

Posted on May 19th, 2014 by The Red Headed Lawyer

Often times, when a marriage goes downhill, spouses may opt to separate rather than divorce. In some cases, a separation can be beneficial due to financial reasons, or it can allow both sides time to decide if divorce should be the final resolution. However, in many cases, opting for the path of least resistance may actually be more detrimental in the long run.

One of the main risks a spouse takes when he or she agrees to separate instead of getting a divorce is that he or she no longer has any control or knowledge of how the other spouse is managing the marital assets. One spouse could be mismanaging funds or even getting into debt that could later be considered joint debt.

Another potential negative outcome of a separation is one spouse could lose his or her job or suffer another major financial shift that could lead to a substantial decrease in your divorce settlement amount. If individuals decide to get a divorce after years of separation, there is always a chance that the financial status of one spouse has changed, and divorce settlements will be based on the current financial status of both spouses.

In some cases of separation, one spouse will move out of the state or country without notifying the other spouse. This could make it difficult to officially receive a divorce, which will postpone custody decisions, divorce settlements, and other legal matters.

In the event that you meet someone new while you are still legally married, it could put a damper on your new relationship. While some people may be accepting of your situation, you run the risk of scaring someone off.

By opting to get a divorce, you make it clear to yourself and your spouse that you are prepared to move on with your life.  Although there may be some cases where a separation makes sense, if you are in a marriage that no longer suits you for whatever reason, opting for a divorce will more than likely be the most logical choice.

Remove Name from Mortgage after Divorce

Posted on January 29th, 2013 by The Red Headed Lawyer

Q: During a divorce, do you know how to get your name off the mortgage, if you’re not the one staying in the house?

A: It is a common scenario when a divorce is pending. One spouse wants to stay in the family residence, the other agrees (usually cannot afford the mortgage on one income), and the two assume that the one who moves out of the home will no longer appear on the mortgage (which carries both spouses’ names). The fact is, ownership of real estate in Texas is, at least for family law purposes, in two parts. First, who owns the property. It is a simple matter to prepare a deed which conveys ownership from one spouse to another during divorce proceedings. Bam, ownership changed. The second part is, who owes for the property. Not so easy. If the mortgage is in the name of the party who is planning to stay in the house, no problem. If that person, after the divorce, pays the mortgage late or defaults, it will not affect the credit of the person who left the home.  The lender can only look to the person whose name is on the mortgage for repayment. However, if, as is usually the case, the mortgage is in both names, then the person leaving the home has fewer options. Unless and until the home is sold or a re-fi is done (can and should be done during the pendency of the divorce), the person who leaves the home may be in the position of no longer living in the home, not having access to information about any default, not having a say-so about whether the home should be sold or not, and having his or her credit affected by late payments or default.  The family court judge who grants the divorce does not have the authority to change this. The only entity with the authority to change it is the lender. In almost 28 years of practicing family law, I have never seen a lender (without re-fi or sale of the home) agree to remove anyone from a mortgage.  Bottom line is, if you are the person leaving the home, there must be a re-fi or sale to insure that you will not later be liable on the mortgage. And, if the divorce decree states that the re-fi will take place after the divorce, it is costly and mostly ineffective to try to enforce that provision.

Financial Help with Divorce

Posted on September 29th, 2012 by The Red Headed Lawyer

Original Article by Hadley Malcolm for USA Today

Amber Rodgers provides financial help with divorce, and can help people anticipate what their financial obligations might be after a divorce. For some, it can be a shock to transition from one lifestyle, to the next.

When she was married, Rodgers had never followed a budget or paid bills online or taken care of her taxes — her husband was in charge of the finances.

Once they were no longer together, Rodgers says she struggled to manage all of her expenses and blew a lot of money on feel-good spending.

“When you go from a dual income into a single income, it’s traumatizing,” the 35-year-old says. “I literally had my electricity turned off because I just couldn’t pay my bills. I had to borrow money from friends.”

Don’t wait until it’s too late to plan financially. If you think your marriage is headed towards a divorce, start getting prepared by reviewing bank accounts, credit cards, insurance, and other assets and liabilities.

“Look at the paperwork that’s probably in your house,” she says. “Look at your tax returns. Look at your monthly bills.” Understanding what you’re working with will better help you prepare for how life will change after the divorce, as well as what you need to do to put yourself in the best financial circumstances possible, she says.

Start setting aside emergency cash, too — Rodgers, who recommends having about $2,000 saved, says she stashed hers in a tampon box and used it to pay initial attorney fees.

And make it a priority to seek professional financial help. It’s most ideal to meet with a financial adviser before or at least during the divorce process rather than after the divorce is finalized, DeGroat says.

Marivonne Essex can refer you to some local, professional, financial advisors in Spring, The Woodlands, Conroe, and the greater Houston area. If you would like to make an appointment with Marivonne Essex to discuss you legal and financial options, please fill out our contact form, or call 281-350-4104 .

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Closure on Marriage, Foreclosure on House

Posted on August 22nd, 2012 by The Red Headed Lawyer

Original Article by Ronald Lipman for Chron.com

Q: I agreed to let my ex-wife have our home when we divorced. However, she recently let it fall into foreclosure, and now my credit is ruined. I was going to buy a new home, but the lender has pulled my funding. Now I can’t find a company to finance the purchase. Plus, I can’t find relief with credit companies to clear my name.

A: It’s too late now, but there was a way for you to have avoided the foreclosure altogether. You could have required your ex-wife to sign a “Deed of Trust to Secure Assumption” when you got divorced. That way, you would have been able to make the payments when she defaulted, and the home then would have belonged to you.

Of course, you would have had to monitor her mortgage payments to make sure she was keeping current. Typically, notices of non-payment are sent to the home-owner’s address. As soon as you found out that she was behind, you could have stepped in, made the payments, and taken the home from her.

Note, though, that even when a Deed of Trust to Secure Assumption exists, the unpaid mortgage payments are sometimes so large that the home still gets lost to foreclosure. In addition to the cash needed to make the delinquent mortgage payments, you would need to make all future mortgage payments, and pay for the upkeep, utilities, property taxes and insurance on the home.

The bottom line is that when you and your ex-wife bought the home and agreed to make payments to the lender, you did so jointly. The lender doesn’t care that you two got divorced. Even though the home was awarded to her, the lender was still looking to both of you for payment. You were both still jointly liable for all the payments that needed to be made on the note even after you divorced.

Her default unfortunately has ruined your credit for years, but there is nothing you can do to change what has happened.

Q: My mother died in 2011. Her house makes up virtually all of her estate, the total value of which is less than $500,000. Are capital gains taxes due when we sell the house?

A: When your mother died, the cost basis of the home was changed to the home’s fair market value on her date of death.

If you sell the home for less than that new cost basis, you won’t owe any capital gains taxes. If you sell it for more than the cost basis, you’ll owe capital gains taxes, but only on the increase in value from your mother’s date of death until the date of sale.

Dealing with credit card debt after divorce

Posted on April 19th, 2012 by The Red Headed Lawyer

Ex-wife stuck with credit card debt
By Ronald Lipman
Published 10:44 p.m., Friday, February 17, 2012
Original Article

Q: My friend got divorced four years ago. There was an interim order by the court for her ex-husband to service their credit card debt, but during their 15-month separation, he never did. By the time of their divorce, the late fees and interest on the card had made the debt unmanageable. It now stands at $45,000. That debt appears on checks of her financial background and probably is the reason she has only been offered straight commission jobs. Can she sue her ex-husband now for the $45,000 and for her pain and suffering caused by the bad debt? Their divorce decree did not address this.

A: No, she can’t sue her former husband for the $45,000, nor can she sue him for her pain and suffering. Under the law, she cannot sue him to enforce any of the interim orders.

She can only sue him to enforce the divorce decree, and since the decree was silent on the debt issue, there would be no basis for her claim.

The above article appeared in Ronald Lipman’s legal column in the Houston Chronicle. It reminded me of how important credit card and other debts can be in a divorce and how little it is understood, even by many attorneys. As a family law attorney who routinely does divorces, I very often see people with large credit card debts, especially during the recent recession. Here is a recap of what I tell my clients:

  1. There are two difference forces at work when it comes to debt in a divorce. One is the judge who grants the divorce; the other is the creditor who is owed. Each of them can do different things.
  2. The judge can determine which party has to pay community debt (debt accrued during the marriage, no matter whether it is in the name of the husband or the wife). The judge tries to make a fair division of all the property, the assets as well as the liabilities. Debts are a part of this division. The Texas Family Code, our set of laws for divorces, says that the judge must make a “just and right” division. This means the judge can, if he or she decides, order wife to pay debt that stands in the husband’s name and vice versa.
  3. The creditor who is owed money can only look to the person who signed up for the debt in the first place, no matter what the judge decides in #2 above and even if the debt is a “community” debt.
  4. The Texas Constitution prohibits a person being imprisoned for debt. If the person ordered to pay a debt in a divorce decree does not pay, the legal remedies are scant, to say the least, and costly for sure.
  5. If your spouse is ordered to pay debt standing in your name and does not pay, your credit will be adversely affected and there is nothing you can do about it.

What does this all mean to you if you are getting a divorce? If you owe debt standing in your name, DO NOT assume that because the judge ordered your spouse to pay it that it (1) will be paid or (2) you will have an effective legal recourse if it is not paid. Make a deal that includes having assets liquidated to pay off the community debt or in which you take more of the community assets in return for taking community debt standing in your name. And, most importantly, hire a good family law attorney that will pay attention to this very important part of your divorce.