How divorcing couples can cut costs and speed up a financial settlement? - Boodle Hatfield

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25 Sep 2020

How divorcing couples can cut costs and speed up a financial settlement?

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In the months following the coronavirus outbreak, and the gloomy economic climate in which we now find ourselves as a consequence of the pandemic, many couples engaged in divorce proceedings may need to reduce their expenses and hasten through the process of dividing their finances.

There are various steps that such couples may consider taking in order to cut costs and speed up the journey to a financial settlement.

Alternative dispute resolution

There has been a significant rise in recent years in couples seeking to achieve a private out-of-court settlement. The delays faced, particularly at present, by those seeking to litigate in the Family Courts can be off-putting. The emotional and financial cost, the threat of endless court hearings and discrepancies in the quality of the judiciary may also make litigation unattractive.

Mediation can be an effective way of resolving disputes, particularly discrete issues or practical problems, such as the day-to-day arrangements for children. The presence of a neutral third party to assist discussions between spouses often enables them to reach decisions that work for their individual family circumstances. Parties can seek independent legal advice alongside mediation which gives them comfort and reassurance along the way. Mediation is not, however, suitable, if there is a risk that one spouse will seek to hide assets; if there is a significant imbalance in power between the spouses; or a general lack of trust.

Arbitration is perhaps a less common, but a no less effective method of resolving such disputes. It involves jointly appointing an agreed arbitrator, accepting that the decision of the arbitrator will be binding, and relying on proper representation and advice throughout the process as if the matter was proceeding at court. However, the parties must accept that they will not have recourse to the appeals process which exists in the Family Courts. In today’s economic climate that may well be a risk that many couples are willing to take.

Perhaps a middle ground between mediation and arbitration, and one that is fast becoming the most preferred route both for spouses and their lawyers is to appoint a family law expert to act as a ‘judge’ and conduct a private negotiation hearing. Whilst this does not have the binding nature of arbitration, the view of an independent expert on the likely outcome if the matter were in Court is extremely effective at facilitating negotiations during the course of a day and often leads to a settlement.

Although all of these methods involve the payment of a fee for the third party, they often fasttrack the outcome, are cheaper than months of litigation through the Courts and put the spouses in control of the quality of their judiciary.

Sale of the matrimonial home

In these uncertain times, it may be that sellers would prefer to accept a lower offer on their property rather than hold out for their initial asking price. Though this may seem like a gamble, the consequences for divorcing couples of retaining their property whilst holding out for a higher offer may be even more severe. In most cases the marital home is the most valuable asset a couple own and in order to achieve a clean break and go their separate ways that house must be sold and the proceeds divided between the couple accordingly. Thus, whilst it may seem preferable to wait for the perfect offer, the consequences of having to wait for months – maybe even years – without moving forward can carry dire financial, not to mention emotional, consequences. Having early discussions about whether the property should be sold or transferred into one spouse’s name as well as taking a pragmatic and sensible approach to things like any minor works that need to be undertaken prior to marketing the property and opting for a realistic marketing price will all assist in speeding up the process.

Private school fees

Whilst parents who send their children to private schools will be contractually bound to pay the fees in accordance with the school’s terms and conditions, if they anticipate future problems in meeting the fees, particularly on a temporary basis, it is generally worth approaching the school to explain the situation and see if there is anything they can do to help. Many schools are surprisingly understanding in such situations and would much rather be warned in advance rather than simply be confronted with an unpaid invoice at the beginning of the new term. Many schools will do what they can to assist divorcing couples whose finances are strained. That may include a payment freeze; a bursary; or an agreement that the fees will be paid, for example, from the sale of the marital home.

Varying spousal maintenance

In circumstances where a financial order has already been made on divorce which provides for the payment of ongoing spousal maintenance, it may be that as a result of the current economic climate, one party needs to apply to the Court to reduce or terminate those payments if he/she feels unable to continue paying at the previous rate. In such cases, a Court would look at all of the circumstances of the case, with a focus on the paying party’s financial resources and to what extent these have changed following the original financial order. In the event that the payor has lost his/her job and has exhausted all means of finding alternative employment a Court would be likely to agree that it may not be viable to continue paying maintenance at the rate to which the payee has been accustomed. These cases can be incredibly difficult as inevitably one or both parties will feel hard done by, whatever the outcome.

Going through a divorce can be stressful enough, without having to worry about the potentially catastrophic economic effects of a global pandemic. The silver lining is that there is a real movement within family law to come up with creative ways to resolve matters outside of Court to minimise costs and speed up the process. Even if there is little that warring spouses can agree upon, more often than not, they can at least agree that this would be in everyone’s best interests.

This article was first published in eprivateclient in September 2020. 

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