The Divorce Process: Avoiding 5 Common Mistakes

Significant life decisions such as divorce should not be made without careful consideration and planning. If unprepared, the divorce process can be more stressful and unpleasant than necessary. It may be wise to consult with legal and financial professionals before sharing your intentions with your spouse.

Here are five common mistakes people make when considering divorce and how you can avoid additional hardship as a result:

1) Procrastinating

Divorce can be an unpleasant experience. It is no wonder why many people initially resist contacting an attorney or gathering the needed documentation in a timely fashion. It can be a long drawn out process – some hurt feelings are almost inevitable. Lengthy separations and complex assets can further complicate the process. However, procrastination is not the solution.

Delaying seeking the help you need can severely limit your options. If you’ve received notice of an impending court date, reach out to a qualified family law attorney right away. Should you delay too long, you may have trouble finding the experienced legal representation you need. Even if you should find an attorney on short notice, you risk being unprepared for the hearing and suffering as a result.

Finally, when you wait too long to close joint accounts you open yourself up to the disappearance of marital assets or additional debts incurred by your spouse in the interim. Find an attorney you’re comfortable with, one familiar with the nuances of your divorce, before sharing the news with your spouse. Which brings me to mistake #2…

2) Not Asking Questions

The legal system can be intimidating while going through a divorce, particularly for those who have had little experience with legal matters. Make a list of any question you have regarding the divorce process and ask your attorney for clear and direct answers. This exercise can be extremely helpful in ensuring that you understand your rights and the consequences of this very significant step in your life.

3) Maintaining Joint Credit

In most cases, creditor law dictates that both parties are 100% liable for debts incurred under a joint account. This means both parties are liable to the bank for the full balance on the joint line of credit or home equity line, regardless of which party makes the purchases. If your spouse goes on a spending spree and the account is still in both names . . . guess what? You’re responsible for this new debt too – in its entirety. This can make a once cordial divorce become contentious very quickly. With credit cards, most often the card is held in the name of one spouse, while the other spouse is an “authorized user.” This can be the most dangerous scenario if your spouse runs up a credit card where you are the primary account holder. In such cases, the bank is going to come to you for full payment – not your spouse. Creditors will hold each party 100% liable on a debt incurred on a truly joint account. However, if a claim for equitable distribution of the marital property is filed with the court, the presiding family court judge can order the spouse that incurred certain debts to take responsibility for paying these debts. A new debt incurred after you have separated from your spouse is the responsibility of the spouse that incurred the debt, according to North Carolina property division law. Beware however, the family court can only order that your spouse take responsibility to pay back a debt. The family court judge does not have the authority to require the creditor to actually release you from responsibility on a debt listed in your name; only a bankruptcy court judge has this power.

Before advising your spouse of your intentions, it is almost always advisable to close your joint credit accounts where possible and establish separate accounts in your own name. Regarding joint bank or other asset accounts, you should seek the advice of an attorney before removing any funds.

4) Not Considering Tax Consequences

In North Carolina, the process of dividing marital assets is called equitable distribution, the tax ramifications from which are governed in large part by Section 1041 of the Tax Reform Act of 1984 (the IRS code). Under equitable distribution, the law provides for a fair allocation of property and assets between spouses. Section 1041 of the IRS code generally states that property transferred “incident to the divorce” from one spouse to the other spouse is not subject to tax. However, you should seek the advice of an attorney to be sure that all transfers are done in such a way that they are considered “incident to the divorce.”

Some states do not consider tax consequences in divorce property divisions, however North Carolina’s statute specifically lists tax ramifications as a factor in determining property distribution. Most commonly, the principal residence is the largest marital asset. Typically, the marital residence is divided in one of two ways: (i) either equalizing payment division, i.e., “buying out” the other spouse (and continued ownership by one spouse), or (ii) sale and division of proceeds at the time of sale. Circumstances can dictate which option is best for you, however each can have a distinctly different tax impact as to taxable gain upon the eventual sale of the residence.

When deciding which of these legal remedies are right for you and your situation, make sure your attorney is clear about short and long-term tax implications.

5) Becoming Underemployed To Avoid Alimony Or Child Support

All too often the higher earning spouse will cut back on work hours or quit a good job entirely, thinking that it could result in a lower alimony or child support. This tactic can easily backfire, as it can create the impression the individual is simply trying to escape responsibility. The North Carolina family court judges will “impute” income to a spouse/parent that has reduced his or her income for the purposes of avoiding support obligations. This means the judge determines the support amount based on what the spouse/parent should be earning if he or she were fully employed.

Quitting your job could result in the ultimate backfire in that is unlikely to result in a lesser alimony or child support payment, and you may end up paying more and having less income to cover those expenses.

We’re here to help

If you have questions about North Carolina divorce law, the Cary family law attorneys at Montgomery Family Law will give you the personal attention and wise council you need during this critical time. We’re here to help and invite you contact us at (919) 348-2317 to schedule an initial consultation.

For further assistance, please use the contact tab at the top of the page!