How to deal with Negative Equity in the Marital Residence

Prior to 2007, in a divorce situation, the division of the marital residence would often be based on how to distribute net proceeds from the sale of the home.  The sale of the home would normally occur within a few months and before entry of a final decree.  Now, however, consideration has to be given to that unfortunate scenario of how to divide responsibility for a short sale or a foreclosure.  With those discussions come how to negotiate a short sale with the bank, how short sales may affect treatment of the mortgage, and whether a short sale will result in a forgiven balance, a separate debt, or a tax form showing the debt as income to the parties.

Negative equity may be further exacerbated if a closing on the sale of the home does not occur before a divorce decree.  If you are divorced by still own property with your spouse, the title changes and your house can become security for the other person’s debt.

Working closely with a lender you trust, a real estate attorney, and your family law attorney can be beneficial to both home owners.  A divorce may mean you are separated but a joint liability on a mortgage does not go away easily.

Effect of Bankruptcy on any Pending Divorce

Bankruptcy and divorce can some times go hand and hand.  The financial difficulties that lead a couple to consider bankruptcy can also put such strain on the marriage that a separation or divorce also is contemplated.  How to address the payment of debts and the potential liquidation of assets is part of both areas of law.

If you are in bankruptcy at the time you separate and are contemplating divorce, you may need to work with both your bankruptcy attorney and divorce attorney to determine what the bankruptcy court will allow and then to factor the bankruptcy into debt and asset allocation.  Terms of spousal support and child support may need to be negotiated in conjunction with the bankruptcy plan, what the trustee will allow and what the Bankruptcy Court will allow.

Questions also arise if a spouse threatens bankruptcy and how that does or does not impact marital debts, payments of spousal support and payment of child support.

Consultation with a family law attorney who understands the dynamics of complexities of the interplay between divorce and bankruptcy can put your mind at ease.

Potential Significance of Life Insurance and Bargaining Value

Life insurance can provide essential security in a situation where at least one spouse may
feel a great sense of insecurity. Under Section 20-108.1 (D), a parent who has a child support
obligation can be required to carry life insurance as long as there is a child support obligation.  Section 20-107.3(G)(2) provides that “the court may order a party to designate a spouse or former spouse as irrevocable beneficiary during the lifetime of the beneficiary of all or a portion of any survivor benefit or annuity plan of whatsoever nature, but not to include a life insurance policy.”

Parties also may choose to agree that as long as there is a spousal support obligation or an
obligation to make payments as part of equitable distribution, the payor may be required to
maintain sufficient coverage.

Important things to remember about life insurance are: premiums must be paid on time,
term coverage may expire at a certain date, beneficiary designations must be kept current and
accurate.

Another important piece to remember about life insurance when crafting any type of
settlement proposal is that whole life insurance policies have cash value which can be considered
a marital asset. You will want to factor this in to the entire picture when dividing the marital
estate.

Taking advanced steps to protect your financial security post divorce is important. Do not make assumptions. Section 20-111.1 provides that any death benefit, not otherwise specifically addressed as part of any final decree or written agreement of the parties, is revoked upon entry of a decree of annulment or divorce.

Going Back to Work

During a marriage, some couples may make decisions about whether a spouse should stay home to take care of minor children.   Many families believe it is important for a parent to be the primary care taker during a child’s pre-school years; and many families, especially those with more than one child, find it beneficial to have a stay at home parent when children are in school to help with activities and  homework.

When a separation occurs, the stay at home parent can sometimes have to face a decision, either voluntarily or out of necessity, to return to work.  Depending on how long he or she has been out of the work force and depending on the spouse’s prior employment history and skills, finding a job or getting back into a career can be scary.

Your family law attorney can help put together a work force reentry strategy that also looks out for the best interests of the family’s children; working with a vocational expert also may be helpful in this regard.  A vocational expert can discuss with you many different aspects of going back to work including the availability of positions in your work field, what additional schooling and or education you may need to get back up to speed to be a competitive candidate, and if changing careers makes more sense given the length of time out of the job market.

Co-Parenting

Joint legal custody is the sharing of decision making on raising a child.  Issues of education, religion, non-emergency medical treatment are part of the decision making processes that may require a consensus between parents.  Joint legal custody does not require shared physical custody.

The ability to communicate and to listen is necessary in a joint legal custody arrangement.  Access to and sharing of information pertaining to the children must occur.

But what happens when a consensus cannot be reached?  Before a determination of wether one parent should be the sole legal custodian, other options may be available.

Co-parenting classes are offered throughout the Richmond and central Virginia area.  Counselors who focus on the unique issues related to co-parenting can offer assistance.  Many books are available as well.  One recommendation from clients and guardians ad litem is "Helping Your Kids Cope with Divorce" by M. Gary Neuman.

Even though a husband and wife may no longer be married, once a parent – always a parent.  Learning how to co-parent effectively early in a separation can be the foundation on which your child’s ongoing development is successful.

Relocation

In today's society, moving can occur for any number of reasons:  employment changes, remarriages, elderly parents in need of care.  When relocation involves children many factors are considered in determining whether the children should move with the relocating parent.  The distance of the new location from where the other parent lives is a large factor as it impacts how each parent will be able to continue a relationship with the child.   Schools, neighborhoods, opportunities for activities, proximity to other extended family are other factors.  Importantly, how the move is best for the children is the focus.

Under the Code of Virginia, either parent who intends to relocate has to give a minimum of 30 days written notification to the other parent.  This notification allows a proactive approach on how the other parent would see the children.  A relocating parent needs to have a plan on how and when the other parent would see the children.  A parent who faces the possible relocation of his/her children needs to quickly learn the options in and out of court to address this change of circumstance.

Change of Custody

Even after there is an agreement for custody or a court order granting custody,  the court always reserves the right to make changes based upon what is in the best interest of the children.  As long as children are minors, the court can make changes in any award which affects them.

Parents must recognize that children mature and circumstances change over time.  As parents reassess their developing children’s needs, it is proper to ask whether interests of the children would be best served by making a change in custody.  However, parents must also recognize that a change of circumstances (ex: a parent has remarried or is planning to move) does not automatically mean that a change of custody is in the children’s best interest.  Each case must be evaluated on its own merits and all factors carefully weighted.  Some of the most difficult cases result when one parent decides to relocate out of the Richmond area, making a custody and visitation arrangement that has worked well in the past no longer possible.

Other kinds of post-divorce custody situations we have been called upon to deal with are:
   *Father has remarried and has a wife who can stay home with the children.
   *Mother has remarried and her new husband has been transferred.
   *Children are older and want to go live with the non-custodial parent.
   *Child is a teenager and is not progressing well in school and/or is getting into
      trouble.
   *One parent has custody, but children have been spending a large portion of
      their time (half or more) at the other parent’s home.

These are just a few examples of the many situations that may cause parents to reassess their children’s circumstances.  Having an experienced family law attorney help evaluate your particular situation is important.