How Divorce can Affect Your NJ Small Business

Divorce can be messy and difficult for everyone involved: the couple, their family and friends, and, for small-business owners, even their business partners and employees. When a business becomes part of a divorce, owners can end up losing all or part of their business. It can be hard to understand what property is subject to division and how to go about protecting your business assets. The good news is there are legal measures business owners can implement to protect their small business in a divorce. Here is everything you need to know.

If a business is included in a property dispute between two divorcing couples, a few things can happen. If one person owns the business outright or with their partner, they stand to lose part or all of the business through divorce proceedings. If the business owner is in a partnership with non-family members, the financial and business damages can extend to business partners. To prevent a former spouse from interfering with a business, the owner(s) can face debt to keep their full ownership. Even if ownership is not in question, all the ill-will and uncertainty that can come with divorce can distract owners and their employees from the well-being of the business.

As with most legal matters, the best way to protect your business is to be proactive from the start. No one plans to get divorced, but if it does happen it is important to know your business will be protected. Forming your business as an LLC or a C-corporation will allow you to title real estate and other property to the business. Establishing this formal structure will prevent assets owned by the business to be split up during divorce proceedings. A prenuptial agreement can also protect your business during a divorce by contractually binding your spouse from seeking ownership over your business, property, or other assets.

If you are already married, you could create a postnup. A postnuptial agreement is similar to a prenup but it happens after a couple has already said “I do.” This is an agreement that would designate assets as separate property or outline how the assets would be divided in the event of divorce. If this isn’t an option for you, you should at least get a good idea of what property is considered individually held and what property is shared. Property acquired or grown during the marriage—including your small business—is normally considered marital property, which is subject to division in divorce proceedings. This way, you have a good understanding of what you could lose in a divorce from your spouse.

Even if you are already in the process of divorcing your spouse, you can still protect your business. While most marital property is subject to division in a divorce, you can negotiate in court for an uneven division of property. Obtaining a valuation for the business can help you determine how much the business is worth and how that worth has increased during the marriage. Working with an experienced attorney can help mitigate the time, risk, and some of the stress throughout this process.

Even the most prepared business owner can face challenges when going through a divorce. Having the support and expert legal advice of an experienced attorney can be essential to getting through the divorce process. Veitengruber Law is experienced in asset protection. We can help you protect your small business and avoid this challenging situation.

How to Manage Credit Card Debt During a Divorce

Divorce is complicated. When it comes to divvying out debt, even the most amicably separated couple can find themselves at odds. In New Jersey, you are responsible for any debt in your name—even if your spouse is the one who racked up the bill. It’s easy to become overwhelmed and end up spending buckets of money either paying off your ex’s debts or facing a pile of legal fees. To avoid making a complex situation any more confusing, here are some great money-saving tips for dealing with credit card debt during a divorce.

Deal With Debt Before Divorce

If you’re already facing credit card debt, it could be financially disastrous to add the high cost of divorce to your financial woes. While it may be difficult, your best option is to deal with the debt before you file for divorce. As tempting as it may be to wait for a court to figure out how to divide the debt evenly, you and your spouse will save a lot of money coming to an agreement on your own.

Meet up and discuss exactly what the two of you owe. If you both have your own credit cards, remove the other person as an authorized user from those accounts. Even if you are just an authorized user on an account, your credit can be impacted if your former spouse does not make on-time payments. If you have joint accounts, consider transferring the balance to new cards that you each take out separately. Look for balance transfer credit cards with low interest rates. If you can compromise with your spouse in how to divide the debt evenly, you could save hundreds or thousands of dollars in legal fees.

If You End Up Paying Your Ex’s Debt

Unfortunately, some people don’t have the chance to be proactive about marital debt before a divorce because they only find out about the debt after the fact. If your name is attached to the account the debt is under, you may have no choice but to take responsibility for the debt. You can take steps to getting your name removed from the account, but in the mean time, you will need to make sure the account is getting paid.

In order to protect your credit, you may be stuck paying off debt accrued by your ex. It is important to note that while you can petition the court to have your spouse repay you for these debts, this path is expensive and you may never get the money back—even if you have a court order. This is why it is very important to make sure you and your ex do not share any accounts at the time you file for divorce.

If your ex does not remove your name from an account willingly, you will need to get a lawyer to prove you did not know about the account and did not benefit from the loan. If you do end up being responsible for paying off a portion of this debt, kept diligent records of your payments. If your ex decides not to pay their part, you will be able to prove that you have a history of making good on your payments.

Work on Creating Good Credit Post-Divorce

Whether you are facing the arduous task of building your credit from scratch or working on paying off debts accumulated in your marriage and subsequent divorce, you will need to generate a solid plan to rebuild your finances. Create a list of your debts to determine how much money you can afford to put towards each debt every month. Your new budget will need to absorb living expenses as well as any debt you are responsible for after the divorce.

It can be difficult to adjust to life under one income instead of two—especially if you are struggling under the weight of credit card debt. Veitengruber Law’s experienced financial legal team can help you come up with comprehensive debt-relief solutions catered to your specific needs. Managing debt during and after a divorce can be complicated and stressful, but you don’t have to do it alone. We can help you make a plan to eliminate burdensome debt so that you can start to move toward financial health.

After Divorce: Should I Refinance my Home?

Despite divorce rates falling steadily over the past few decades, it remains a strong possibility than a once happily married couple might decide to split up. When divorcing, one of the most confusing and contentious issues a couple faces (aside from custody battles) is often the matter of deciding what to do with the family home.

While the most advisable course of action may vary somewhat with each situation, it’s always vital to make any discussions about the mortgage front and center. Your home is likely your biggest shared asset, and your decisions about the mortgage will impact both of you for many years to come.

If your ex will be the party taking possession of the marital home, remember you will be liable for your shared mortgage until the home is sold, the mortgage is paid off in full, or your ex refinances to remove your name entirely.

You see, removing your name from the title of the home does not absolve you of legal responsibility for the mortgage! This is a common misconception that has resulted in financial harm for countless divorced homeowners. As long as your name remains on the mortgage, your credit is at risk for substantial, long-lasting harm.

If you’re the party remaining in the home, you’ll probably be required to buy out your spouse’s share of the home’s equity. Refinancing your home will allow you to take out a cash portion of that equity to use as you wish—including paying off your spouse so they no longer have any claim to your home.

For example, let’s say that Amy and James purchased a $450,000 home together while they were married. Their outstanding mortgage balance now, at the time of their divorce, is $300,000. The remaining $150,000 is their shared equity in the home. If their divorce terms state that Amy and James are splitting their assets 50/50, Amy would have to come up with $75,000 to buy James out of the home.

Unless Amy has a suitcase full of cash lying around (or a healthy retirement fund), she’s going to want to refinance the home in her own name with a cash-out agreement, then use cash from the home’s equity to pay James what he’s owed. Afterward, she can transfer the home into her name alone.

If you’re like Amy and you want to buy out your former spouse, your first step toward taking sole ownership of the property is to figure out the exact amount of your share of your home’s equity. Here’s how to do it:

1. Find out the home’s current value.
2. Subtract your outstanding mortgage balance from this number.
3. Calculate your percentage of the remaining equity based on the terms of your divorce agreement.

In order to determine your mortgage balance, ask your lender for a “payoff” total. This figure, once balanced against any equity lines of credit, second mortgage, or outstanding debts against the property, is your balance.

Now, your portion of the equity depends on the terms you’re able to negotiate in your divorce settlement. This usually hinges on factors like whether the two of you purchased your home together, whether the home has been paid for equally since it was purchased, and whether or not the home is covered by a prenup.

Of course, paying off your ex and securing sole ownership isn’t the only good reason to refinance after a divorce. You might choose to dip into your home’s equity to give yourself a cash cushion as you navigate the first 6 – 12 months of financial independence, or you might be better served by using some of these funds to pay off high-interest credit cards. Your circumstances will dictate the wisest use of these funds, so do consider your overall financial situation while you make this decision.

If your mortgage was first secured before 2008 and you haven’t refinanced recently, you stand a good chance of being able to lock down a lower mortgage payment. Interest rates are significantly lower than they were before the recession, even taking into account the spike in rates over the past few years.

When considering the overall trend toward higher interest rates, this is probably a good opportunity for you to exchange an adjustable-rate mortgage for a lower, fixed-rate mortgage. While the initial low cost of an ARM is appealing, the inherent uncertainty may not be the best option for you in the years to come. Consider the cash flow you can expect post-divorce, and calculate whether or not you could adapt to a higher interest rate if rates continue to climb for the next decade.

Although divorce is stressful at best and often utterly heartbreaking, it’s also an opportunity to take control of your finances and position yourself for a healthy, fresh start. Take care of yourself throughout this process, and try to keep your emotions at bay while you are making these crucial decisions.

Properly tending to your post-divorce financial well-being will require you to be savvy, focused, and optimistic in the face of adversity. Taking the time to educate yourself on how your mortgage functions as the cornerstone of your financial security will serve to empower you to use your mortgage to serve your own financial goals.

My Ex Is Using My Credit Cards after Our Divorce!

Unfortunately, divorce almost always brings with it some degree of contention. Regardless of what the former couple disagrees about, it usually comes down to a “he said, she said” type of dispute.

Sometimes, however, there is legal recourse for post-divorce behavior that simply crosses the line. Take, for example, a woman who, upon setting out to clean up her credit report and boost her score, discovered that her former husband had been using her credit cards quite liberally well after they split up.

While, yes, there can be a bit of ambiguity when it comes to using shared cards in the time period after a married couple decides to part but before the Final Judgement of Divorce has been entered, the law speaks loud and clear after the divorce is final.

Any use of your ex-husband or ex-wife’s credit cards (that are in his or her name only) after you divorce is specifically disallowed. In fact, it’s against the law and reeks of identity theft.

Do some married couples use each other’s credit cards while they’re married? They do – even if the credit card in question is not a shared card and only officially “belongs” to one party. This is legal if the non-card-holder is named as an authorized user on the account.

Example: Husband goes out of town for the weekend and leaves his credit card for his wife to use for shopping. As long as she is an authorized user on his account, this is perfectly legal. However, she must sign her own name on any receipts as opposed to forging her husband’s signature.

Even if you’re currently happily married, it is generally considered unwise for you to utilize your spouse’s credit card (that is in his or her name only) if you aren’t listed as a user of the credit card. Some couples do it anyway because most merchants assume that the cardholder gave permission to the spouse to use their card. Simply calling your credit card company and adding your spouse as an authorized user is easy to do and can eliminate any potential problems.

After you are officially divorced from your spouse and are holding the Final Judgement of Divorce in your hands, there should be exactly zero further use of the other party’s credit card. This is true even if you were listed as an authorized user while you were married. Should your spouse forget to remove your name from their authorized users list, this does not in any way mean that you may continue using your ex’s credit after divorce.

An ex-spouse utilizing your credit card falls under the category of a criminal offense: identity theft. It is no different than a complete stranger stealing and using your credit card(s). If this has happened to you, the next step you should take is filing a police report and sending a copy of the police report to the credit reporting agencies. Working with a credit repair specialist will help you get the debt removed from your card and you may even be successful in making your ex pay for the charges.

Financial Consequences of a NJ Divorce from Bed and Board

New Jersey couples who want to separate but not completely divorce have the option of choosing a legal process called divorce from bed and board. This is New Jersey’s version of a legal separation.

Why not just sever all ties and get divorced?

While there are many reasons why a married couple may not be ready to commit to a final divorce (irony noted), for the purpose of our finance-focused blog, we’re going to, as usual, hone in on MONEY.

Most spouses who are interested in a bed and board divorce are generally still amiable and see the benefit of working together to end their marriage in the best financial way possible for both parties.

Health Insurance Benefits

Probably the biggest money-saving reason to consider a divorce from bed and board is so that the dependent spouse can retain health insurance benefits even after the couple separates. Oftentimes, married couples have one insurance policy through one spouse’s employer. A bed and board divorce is especially applicable in cases wherein one spouse was a stay-at-home-parent or was otherwise unemployed in the capacity that would allow them to acquire health insurance of their own.

Private health insurance coverage is expensive. Divorcing couples in New Jersey in which the dependent spouse needs access to healthcare on a regular basis (ie. those dealing with a chronic illness) can choose the limited (b&b) divorce option, allowing the dependent spouse to remain covered under their working spouse’s policy until such time that he or she is able to obtain independent coverage.

Tax benefits

New Jersey homeowners who are joint owners due to marriage may be unsure how they want to divide the marital home. Moving from one household into two is, as you can imagine, enormously expensive.

Some married couples who no longer wish to be married recognize that it is wise for them to temporarily continue owning property together. This may mean that both spouses remain living in the marital home until both parties have a better hold on their independent personal finances. Additionally, continuing joint ownership of the marital home helps couples avoid property tax repercussions because the IRS views a divorce from bed and board as identical to a legal separation.

Retaining joint home ownership also gives couples who want it the time they need to transfer the title from both spouses to one spouse. This is because there are generally no time limits on property transfers between spouses who are divorced from bed and board in New Jersey.

Survivor benefits

A limited divorce from bed and board allows survivor benefits on many pension plans to remain unchanged. This is also true of many federal and social security retirement benefits. This can be very important for older couples who are nearing retirement age as well as younger couples who have children.

Although it is true that a divorce from bed and board offers many financial advantages, it is important to work with a family law attorney who has experience in this arena. It is crucial to be sure of the language in your specific benefit package(s) before making any decisions. If your personal finances are keeping you from getting the final divorce you want and need in order to move on and be happy, you may also want to consider filing for NJ bankruptcy.

 

 

Image: “Marriage Rings” by Robert Cheaib is licensed under CC by 2.0

Divorce and the Stay-at-home Mom: Your Financial Rights

Although we are not a family law firm, a number of our clients are recently divorced. Divorce can do a number on anyone’s finances for a variety of reasons, and many divorcees eventually file for bankruptcy in order to get a fresh start.

Today, let’s take a step back from bankruptcy and take a look at how to get through the divorce process itself. If both spouses are wage earners who then move into separate residences, the financial burden on each person suddenly becomes much higher than it was while supporting only one household with two incomes.

Even more challenging is the experience of the stay-at-home mom who has heretofore relied on the income of her spouse. Naturally, the stay-at-home mom (or dad) is, by definition, not employed outside of the home and therefore has no income of her own.

What rights does a stay-at-home mom have during a divorce?

When a couple makes the collective decision for one parent to stay home to raise children rather than work a traditional “job” with a paycheck, the stay-at-home parent becomes entitled to part of the working spouse’s income. Giving up years of work experience and potential earnings to care for the couple’s kids is worth something if and when the marriage fails.

Although a parent who has been out of the work force for many years may need to explore employment once the divorce is final, this will not happen during the lead up to divorce. The working spouse will be required to continue paying all of the household expenses throughout the duration of the divorce negotiations.

Non-working parents can also petition the court for temporary spousal support before the divorce is final. This money is paid by the wage earning spouse so that the stay-at-home parent can afford food and basic necessities.

Once your divorce case reaches the court system, many financial decisions must be made regarding child support, alimony, equitable distribution, the marital home, joint debts and more. During this time, a judge will determine if the stay-at-home parent is “employable,” and if so, what her earning potential is.

If the stay-at-home parent has never been employed and has always been dependent on her spouse’s income, alimony is likely to be granted. This is especially true if the unemployed parent has no college degree and zero work skills.

A stay-at-home mom with a college degree may still receive alimony along with child support, but the amount of alimony awarded will likely be lower because her degree gives her potential to find a decent paying job.

If you are currently a stay-at-home mom who is facing divorce, know that you will not be left on your own with no money to support yourself and your children. Dedicating a number of years of your life to raising your children is an important decision that you and your husband likely made together. Regardless of who filed for divorce, you can breathe a sigh of relief knowing that there are laws in place to ensure that you’ll be able to pay your bills.

Been all the way through a divorce and are now looking to improve your overall financial outlook? Filing for bankruptcy post-divorce is often a good decision. To learn more about whether bankruptcy is right for you, shoot us a quick message. We’ll consult with you free of charge.

 

Image credit: The Hidden Collection

My Ex Owes Me Money: Will I Ever Get it Back?

Often times, when a married couple decides to split up – the dissolution of the marriage takes a significant amount of time. This lag period can be extremely difficult for people who are ready to move on (and away) from each other. In fact, many divorcing couples actually end up living together for much longer than either party would like – due to entangled finances, lack of substantial income, shared debts and convenience.

It’s a rare couple who can make it through a time period like this without at the very least getting into some heated arguments. Knowing that you’re no longer a romantic couple but having no other option but to continue living under the same roof can create an amazing amount of psychological strain. This can lead to increased fighting or deafening, never-ending silence.

On the other hand, there are couples who mutually acknowledge their need to “uncouple.” While recognizing that they are no longer working well as a pair, they still manage to remain civil and often even remain friends. Obviously, this type of split is preferable to the former, more contentious model, but it does invite problems of its own.

As romantic love fizzles out and a more business-like relationship takes hold, discussions shift from sharing your inner thoughts to who’s going to pay which monthly bills before the divorce is final and the Property Settlement Agreement is in place. It is during this delicate time period that clear communication is needed more than ever before, especially regarding finances.

I lent my ex money during our separation: will I ever be able to get it back?

Sharing finances is extremely common in the months/year (or so) after a couple has made the decision to divorce. Entangled bank accounts and bills are sometimes the last things to separate during a split, especially if one spouse makes significantly more money than the other.

During this very sensitive time, it’s quite common for the spouse with the higher-paying job to help out the other spouse until s/he can get back on track. What may have been normal financial practices during the length of the marriage may now take on terms like “loan,” “borrowing” and “I’ll pay you back.”

It’s fantastic if a divorcing couple can manage to put their differences aside in order to see each other to the finish line with both parties in good financial standing. Something important to know, however, is that it’s kind of impossible to “loan” your legal spouse money. As long as you were still legally married, there is no such thing as “loaning money” from one party to the other. All money within the marriage belongs equally to both spouses until such time as the Final Judgment of Divorce is received.

If you’ve lent money to your “ex” when s/he is technically still your spouse, chances are high that you’ll never see that money again. Count yourself lucky if your “ex” is a good-hearted person and at some point in the near future has the ability and the desire to settle up any ‘oral agreement’ loans that were negotiated during your separation.

 

Image credit: Quazie