Breaking up (the finances) is hard to do

Untangling finances can be the most difficult aspect of ending a marriage. In fact, divorce and separation have been named as the biggest causes of adverse credit, which makes it essential to understand what splitting up entails.

You could find yourself dividing your savings, applying for legal aid or paying maintenance to your husband. In settling the financial arrangements – called ancillary relief – every divorce is unique.

The upshot is that you need to know what is going on with the family finances. ‘Wives who know what there is and where it is are in a stronger position on divorce,’ says Claire Gordon, a solicitor at top law firm Farrer & Co. ‘The actual divorce suit is usually a very simple process, basically form-filling.’

The first step is finding a good solicitor. A personal recommendation is an option, or contacting Resolution, whose member lawyers are committed to trying to resolve a case amicably.

Though most divorces do not go to court, if you cannot reach a settlement yourselves, you may have to let a judge decide.

‘Once you go to court it’s out of your hands,’ says Christina Tait, a former export manager. Now 49, she separated from her husband in 1998 after 17 years of marriage, during which they had two children.

She spent three years going through the court system on children’s and financial issues. ‘There was no co-operation, it was very hard,’ she says.

‘When you come out of the lawyer’s office where do you go? I felt so isolated and alone.’

Christina decided to set up Divorce Aid (divorceaid.co.uk), a voluntary network of professionals who offer advice and information. They can help you find a mediator, who works with both spouses to reach agreements.

Mediator Mark Young says: ‘Having an independent person sitting in the middle takes a lot of the heat out of the argument.’ Similarly, collaborative law, a relatively new option, aims for an amicable resolution (collabfamilylaw.org.uk).

If you are not working, you may want to consider whether you should try to secure interim maintenance, or with certain restrictions, legal aid. However, it is important to realise that if your divorce leaves you with assets such as a house, you will have to pay back your aid.

Isabel McCorquodale, 47, an early years support officer from Gourock, near Inverclyde, discovered she would have to make a payment when she recently sold the house she received in her divorce settlement. ‘It was a few thousand,’ she said. ‘That was a shock.’

Isabel had divorced her husband in an acrimonious split in 1990. Though he had been working abroad in a high-paying job, he had not been paying the mortgage, which was in his name only.

‘The house was put in my name as far as the court was concerned, but the building society wouldn’t put it in her name until I had paid off the debts he had built up,’ she says.

It took Isabel two years of hard work at a children’s centre to clear the debts, during which she looked after two daughters. But, she says, it could have been worse.

‘I never gave up my own bank account – it’s very important to have your own money.’ In her current relationship, she makes sure to know ‘everything about the bills, the mortgage and the tax’.

However, a mortgage is not only a potential headache if it is in your husband’s name. If both names are on the mortgage deed, both of you are responsible. Similarly, problems can arise if one person stops paying the bills.

Jeff Knight, head of marketing services at mortgage provider GMAC-RFC, says: ‘They might assume the other is paying or do it deliberately. The solution is always to get independent financial advice.’

If there are going to be problems in making payments, he adds, it is important to let your lender know immediately.

In the long term, the home, likely to be a couple’s biggest asset, is usually sold and the proceeds shared, or transferred to one person with the other receiving assets. You will also have to decide whether a clean break (in which all maintenance is paid as a lump sum) or ongoing maintenance is best for your situation. If both of you are working and there are no children involved, a more or less 50/50 split is likely. If not, the law sets out a number of factors to take into consideration.

Jean Jake

When Jean Hake, 57, from Chelmsford, split from her husband in 2001 after 25 years of marriage, she was advised by her solicitor to sit down and make a list of her needs – ‘shopping, dentist, vet’s bills for the cats’.

Her husband had been the family’s main earner and as the divorce was fairly amicable, agreeing maintenance for Jean and their three daughters was ‘quite straightforward’.

Since the law now allows a pension to be shared in a divorce, Jean was able to secure her own separate pension with her ex-husband’s employer. The biggest issue was dividing their savings.

‘I wanted a 50/50 split but he thought it should be 60/40.’

In the end they agreed to settle 55/45, but Jean says were she to do it again, she would hold out for an even split: ‘I don’t see why a man should get more because he worked.’

Of course, being the breadwinner can pose its own problems. Kate (not her real name), 40, is currently struggling with debt after splitting from her husband of fifteen years in 2003. ‘I’ve worked hard all my life and I’m now ending up in a lot of debt which I can’t pay,’ she says.

With a well-paying job in IT, she estimates that her financial contributions to the marriage were about 80 per cent, while her husband, a plumber, earned as little as £8,000 in some years.

When mediation failed, the courts ruled that their three children should live with Kate’s husband, who was awarded the family home and half Kate’s pension.

In addition, the near £40,000 worth of debt built up by the couple is Kate’s responsibility. Rather than using a joint account, her husband was the second cardholder on Kate’s account, so the debt is hers.

‘He used to put things through for his business on my card on the understanding that he would pay me back,’ she says. He did not, and Kate is now applying to her creditors to suspend the interest on her debts, and building a new life.

Given that divorce can be such a difficult process, it is important to go into it with your eyes open. What funded one household will now be supporting two homes, so at least some financial adjustment will be needed, and you may not be that happy with the final result. But as Christina Tait says: ‘It gives you a means to start again. Financial settlements are just the start of a new phase in your life – and it’s up to you to make the most of it.’

Posted by Emma Rowley on Saturday, January 21st, 2006 at 11:49 am.

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