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Negotiation of Assets questions, I promise

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bd420

Member
What is the name of your state?
Michigan

Negotiation of Assets questions, I promise I'll keep this just one thread this time ;-).

6 years ago, our current house was financed at 117k. Currently, the liens on the house are 152k, a difference of 35k of debt. If you factor in the reduction in principal from 72 months of making payments, the debt is probably more like 40k.

1) Can this difference in lien amounts from the date the house was purchased to the date of separation be factored in to the debt equation in my settlement situation? These debts were the result of credit card debt that got continually refinanced, having said that....

2) We currently have 32,000 in credit card debt, most of which is my wife's, yet I obviously have to prove that. I have documentation on the following credit card purchases that were made on my credit cards for her sole benefit:
a) Collection Agency payoff for a lease she broke for the amount of $4,292.
b) Hot Tub that she simply would not live without, it was charged for the amount of $5,500.
c) Bail money for an OUIL charged for the amount of $330.
d) Atty fees to plea bargain teh OUIL charged for the amount of $750.

3) I have documentation on 53 revolving lines of credit in my name spanning the 8 1/2 yrs of our marriage. Can I pursue itemized statements of each one, incurring the expenses, in an effort to prove she has even more credit card debt for her own gain and personal use. I realized this would in turn result in tracking down the orders made to various mail order magazines that show up on the credit card statements, which would make this whole undertaking incredibly ardous. Yet, I simply am adamant and it makes me sick to think she is going to get away with racking up the better part of $72,000 in credit card debt, and come away with not being responsible for the first 40k at all, and then splitting the remaining 32k.

4) A general question on 401k contributions. Are the contributions made by an employer included AND is this treated as 1/2 asset entitlement for the spouse, despite the fact little or no contributions may have been made in addition to the employer? Example, My employer gives 10% to my retirement, I don't have to give any, and I chose not to. The other spouse has not employee retirement plan where they contribute, and the other spouse decides not to contribute. After 4 years, the one spouse has 20k in retirement generated solely by the employer contributions, while the other spouse has No (0) money in retirement. Is the other spouse entitled to 1/2 of the retirement, ie, 10k?

Thanks. If anyone else has any gotchas or items to look out for in settlement negotiations, I would appreciate hearing them.

Thanks,

bd
 


LdiJ

Senior Member
bd420 said:
What is the name of your state?
Michigan

Negotiation of Assets questions, I promise I'll keep this just one thread this time ;-).

6 years ago, our current house was financed at 117k. Currently, the liens on the house are 152k, a difference of 35k of debt. If you factor in the reduction in principal from 72 months of making payments, the debt is probably more like 40k.

1) Can this difference in lien amounts from the date the house was purchased to the date of separation be factored in to the debt equation in my settlement situation? These debts were the result of credit card debt that got continually refinanced, having said that....

2) We currently have 32,000 in credit card debt, most of which is my wife's, yet I obviously have to prove that. I have documentation on the following credit card purchases that were made on my credit cards for her sole benefit:
a) Collection Agency payoff for a lease she broke for the amount of $4,292.
b) Hot Tub that she simply would not live without, it was charged for the amount of $5,500.
c) Bail money for an OUIL charged for the amount of $330.
d) Atty fees to plea bargain teh OUIL charged for the amount of $750.

3) I have documentation on 53 revolving lines of credit in my name spanning the 8 1/2 yrs of our marriage. Can I pursue itemized statements of each one, incurring the expenses, in an effort to prove she has even more credit card debt for her own gain and personal use. I realized this would in turn result in tracking down the orders made to various mail order magazines that show up on the credit card statements, which would make this whole undertaking incredibly ardous. Yet, I simply am adamant and it makes me sick to think she is going to get away with racking up the better part of $72,000 in credit card debt, and come away with not being responsible for the first 40k at all, and then splitting the remaining 32k.

4) A general question on 401k contributions. Are the contributions made by an employer included AND is this treated as 1/2 asset entitlement for the spouse, despite the fact little or no contributions may have been made in addition to the employer? Example, My employer gives 10% to my retirement, I don't have to give any, and I chose not to. The other spouse has not employee retirement plan where they contribute, and the other spouse decides not to contribute. After 4 years, the one spouse has 20k in retirement generated solely by the employer contributions, while the other spouse has No (0) money in retirement. Is the other spouse entitled to 1/2 of the retirement, ie, 10k?

Thanks. If anyone else has any gotchas or items to look out for in settlement negotiations, I would appreciate hearing them.

Thanks,

bd
If your name is on the debt...credit cards etc...then the debt didn't happen without your knowledge. You either signed for the debt, or signed to make the credit card/lines of credit available. Therefore its probable (not 100% guaranteed but probable) that you are going to be stuck with 1/2 of the debt.

If the other spouse is not trustworthy regarding paying bills....then to protect your credit you may be better off taking responsibility for ALL of the debt.....because you could end up being responsible for it anyway. If the other spouse doesn't pay what the court orders them to pay the creditors WILL come after you (they are not a party to the divorce)...and your credit will end up taking the hit...or you could even end up having to file bankruptcy.

If there are enough assets (home equity, 401K, cars etc.) that you could keep assets equaling the debt that would be ideal.

In the meantime...you need to be closing each and every one of the revolving lines of credit.
 

bd420

Member
Correct, I had knowledge good point....

LdiJ said:
If your name is on the debt...credit cards etc...then the debt didn't happen without your knowledge. You either signed for the debt, or signed to make the credit card/lines of credit available. Therefore its probable (not 100% guaranteed but probable) that you are going to be stuck with 1/2 of the debt.

If the other spouse is not trustworthy regarding paying bills....then to protect your credit you may be better off taking responsibility for ALL of the debt.....because you could end up being responsible for it anyway. If the other spouse doesn't pay what the court orders them to pay the creditors WILL come after you (they are not a party to the divorce)...and your credit will end up taking the hit...or you could even end up having to file bankruptcy.

If there are enough assets (home equity, 401K, cars etc.) that you could keep assets equaling the debt that would be ideal.

In the meantime...you need to be closing each and every one of the revolving lines of credit.
Yes, you are very correct in saying I had knowledge that we needed to use the credit cards to make these purchases for her sole use, in 3 of the cases, the only recourse was NOT bailing her out, NOT getting atty representation causing possible jail time, and NOT settling her debt, which would have resulted in garnishing of wages, further obliterated her credit with a judgment on her credit record, and all 3 failures to use the credit cards would have almost assuredly led to a divorce had they not been done, I simply felt I had no recourse, it was the only option I had.

Having said all that, my spouse is steadfast about NOT bring ANY of this in front of a JUDGE. She wants it ALL taken care of before then, ie, right now, 3 months before the Divorce is to be final, she has initiated the negotiation of assets, which is the only issue left to agree to in this Divorce proceeding. Therefore, on question would be, can I bargain with her on these debts (minus the hot tub) with the leverage that if she doesn't budge on the 50/50, I'll wait until the JUDGE hears the case (which, as I said, she is vehemently against)?

For clairfication, are you in fact saying that the house going from 117k to 152k in liens plus the 72 actual payments made TO THE PRINCIPAL are also communicable debt, if so, do I have to 'prove' anything, ie, that we didn't buy 'somethings' for 40k? If this IS communicable debt, and the burden of proof is on her for disuputing it, we are then talking about her having an additional 20k of debt on her side, which actually will put me in the plus on the ledger!!! So, I really need to know this fact for peace of mind, for some reason, I didn't even think of this aspect of our debt until a couple of days ago, so I'm eager to find out.

Lastly, any ideas on the question of employer contributions with 401k? Are those split 50/50 despite the fact it was my employer that was gracious enough to make the contributions?

Thanks much

bd
 

momtooo

Junior Member
Your wife is only entitled to half of contributions made to the 401k during the course of your marriage. No matter who made the contributions.

Good luck ;)
 

LdiJ

Senior Member
bd420 said:
Yes, you are very correct in saying I had knowledge that we needed to use the credit cards to make these purchases for her sole use, in 3 of the cases, the only recourse was NOT bailing her out, NOT getting atty representation causing possible jail time, and NOT settling her debt, which would have resulted in garnishing of wages, further obliterated her credit with a judgment on her credit record, and all 3 failures to use the credit cards would have almost assuredly led to a divorce had they not been done, I simply felt I had no recourse, it was the only option I had.

Having said all that, my spouse is steadfast about NOT bring ANY of this in front of a JUDGE. She wants it ALL taken care of before then, ie, right now, 3 months before the Divorce is to be final, she has initiated the negotiation of assets, which is the only issue left to agree to in this Divorce proceeding. Therefore, on question would be, can I bargain with her on these debts (minus the hot tub) with the leverage that if she doesn't budge on the 50/50, I'll wait until the JUDGE hears the case (which, as I said, she is vehemently against)?

For clairfication, are you in fact saying that the house going from 117k to 152k in liens plus the 72 actual payments made TO THE PRINCIPAL are also communicable debt, if so, do I have to 'prove' anything, ie, that we didn't buy 'somethings' for 40k? If this IS communicable debt, and the burden of proof is on her for disuputing it, we are then talking about her having an additional 20k of debt on her side, which actually will put me in the plus on the ledger!!! So, I really need to know this fact for peace of mind, for some reason, I didn't even think of this aspect of our debt until a couple of days ago, so I'm eager to find out.

Lastly, any ideas on the question of employer contributions with 401k? Are those split 50/50 despite the fact it was my employer that was gracious enough to make the contributions?

Thanks much

bd
Ok...I need to explain this better. You have a house. The house has a certain amount of equity which the two of you must divide. Yes, she is responsible for half of the debt on the house....but that is already covered by her half of any equity that she loses due to the debt.

In other words....if the house would have had 100,000 in equity then she would have been entitled to 50,000. However, if the 40,000 of debt reduces the equity to 60,000...then she is only entitled to 30,000.....so her half of THAT debt is already covered by the reduction of her equity.

Plus...that debt could go away for both of you by simply selling the house and splitting the proceeds.

Its the rest of the debt that you need to be concerned about. Yes, you may be able to make her solely responsible for the portion of it that pertains to legal issues or a debt prior to marriage....however if I understood you correctly the debt is all in your name....and she isn't particularly responsible about paying bills. Therefore, you need to be thinking about this clearly!

No matter what a judge orders her to pay....if its in YOUR name too, and she doesn't pay it...you are going to get stuck with it and your credit is going to be damaged. Please understand, the creditors are NOT a party to your divorce and are NOT bound by the terms of the divorce. They are bound ONLY by the credit agreements you signed.

If I were you....I would be negotiating a settlement where I kept ALL the debt...and corresponding assets. For example...you mentioned a figure of 32,000. If there is at least 32,000 in assets between your 401k and the equity in the home....then I would be negotiating that she does not get any equity in either...in exchange for you keeping all of the debt. Then you would divide any other assets in half.....or if there is more equity in the house after the 32,000 is taken into consideration....then you only buy her out for 1/2 of the difference...etc.

Then, if possible, after the divorce was final I would roll all of the debt into the house in a refinance...to maximize tax advantages.
 
Last edited:

bd420

Member
I just realized you are again correct

LdiJ said:
Ok...I need to explain this better. You have a house. The house has a certain amount of equity which the two of you must divide. Yes, she is responsible for half of the debt on the house....but that is already covered by her half of any equity that she loses due to the debt.

In other words....if the house would have had 100,000 in equity then she would have been entitled to 50,000. However, if the 40,000 of debt reduces the equity to 60,000...then she is only entitled to 30,000.....so her half of THAT debt is already covered by the reduction of her equity.

Plus...that debt could go away for both of you by simply selling the house and splitting the proceeds.

Its the rest of the debt that you need to be concerned about. Yes, you may be able to make her solely responsible for the portion of it that pertains to legal issues or a debt prior to marriage....however if I understood you correctly the debt is all in your name....and she isn't particularly responsible about paying bills. Therefore, you need to be thinking about this clearly!

No matter what a judge orders her to pay....if its in YOUR name too, and she doesn't pay it...you are going to get stuck with it and your credit is going to be damaged. Please understand, the creditors are NOT a party to your divorce and are NOT bound by the terms of the divorce. They are bound ONLY by the credit agreements you signed.

If I were you....I would be negotiating a settlement where I kept ALL the debt...and corresponding assets. For example...you mentioned a figure of 32,000. If there is at least 32,000 in assets between your 401k and the equity in the home....then I would be negotiating that she does not get any equity in either...in exchange for you keeping all of the debt. Then you would divide any other assets in half.....or if there is more equity in the house after the 32,000 is taken into consideration....then you only buy her out for 1/2 of the difference...etc.

Then, if possible, after the divorce was final I would roll all of the debt into the house in a refinance...to maximize tax advantages.
I just realized you are again correct, just before I saw your post, yes, the debt represented in the liens increasing is already being accounted for in the smaller available Equity in the house, I was in essence trying to count the debt twice :-(.

I completely agree with you about the subseqeuent ownership of all the CC debt, I WILL be taking ALL ownership, 100%, I would be clinically insane not to.

The total house equity is $26k, of which she gets 13k. She has 8k of retirement, I had 51k of retirement, it's my understanding that I subtract 8k from 51k, leaving 43k and divide that by 2 yielding $21.5k. Therefore 13k + 21.5k equals 34.5k of assets she's entitled to between just those 2 items.

On the debt side, of the 32k of CC debt, 3.8k was post date of separation on her part with a CC she had authority to use, and she has stated that she will be held accountable for this sole debt. If so, that leaves 28.2k of CC debt to unfortunatly split in half, or 14.1k per side. 14.1k + 3.8k yields 17.9k of debt she is responsible for with the CC's.

Since both cars are paid, we have no other loans other than the CC's except for the mort and 2nd lien, which have already been discussed.

It would appear her Net from the items discussed is 34.5k - 17.9k, or 14.4k, does my logic and math appear somewhat correct? If so, can she demand cash or does this money have to come from my 51k of retirement?

Thanks for continuing to clarify.

bd
 

bd420

Member
401k or House Equity, which takes precedence

LdiJ said:
<snip>
If I were you....I would be negotiating a settlement where I kept ALL the debt...and corresponding assets. For example...you mentioned a figure of 32,000. If there is at least 32,000 in assets between your 401k and the equity in the home....then I would be negotiating that she does not get any equity in either...in exchange for you keeping all of the debt. Then you would divide any other assets in half.....or if there is more equity in the house after the 32,000 is taken into consideration....then you only buy her out for 1/2 of the difference...etc.
<snip>
401k or House Equity, which takes precedence in a payout? Is there no precedence among the 2, and it's merely part of the negotiation, ie, Home Equity would seem to indicate Cash, whereas 401k would indicate funds are moved from my account her either an existing account of hers or a new account to keep track of the amount better, etc.

Also, is it not uncommon for the negotiating spouse that accepts ALL ownership of the CC debt (32k in this case) AND the Home Equity Loan (16k in this case) to receive a 'break' in terms of the assets given in return. After all, debts have interest and will take forever to pay off, assets can be sold, and the cash invested for monetary gain, etc. Not to mention one's Credit History is continually on the line for the entire duration, etc.

Just wondering,

Thanks,

bd
 

LdiJ

Senior Member
bd420 said:
I just realized you are again correct, just before I saw your post, yes, the debt represented in the liens increasing is already being accounted for in the smaller available Equity in the house, I was in essence trying to count the debt twice :-(.

I completely agree with you about the subseqeuent ownership of all the CC debt, I WILL be taking ALL ownership, 100%, I would be clinically insane not to.

The total house equity is $26k, of which she gets 13k. She has 8k of retirement, I had 51k of retirement, it's my understanding that I subtract 8k from 51k, leaving 43k and divide that by 2 yielding $21.5k. Therefore 13k + 21.5k equals 34.5k of assets she's entitled to between just those 2 items.

On the debt side, of the 32k of CC debt, 3.8k was post date of separation on her part with a CC she had authority to use, and she has stated that she will be held accountable for this sole debt. If so, that leaves 28.2k of CC debt to unfortunatly split in half, or 14.1k per side. 14.1k + 3.8k yields 17.9k of debt she is responsible for with the CC's.

Since both cars are paid, we have no other loans other than the CC's except for the mort and 2nd lien, which have already been discussed.

It would appear her Net from the items discussed is 34.5k - 17.9k, or 14.4k, does my logic and math appear somewhat correct? If so, can she demand cash or does this money have to come from my 51k of retirement?

Thanks for continuing to clarify.

bd
You have the right theory, but you are off on the math.

You need to add 51k in your retirement plus 8k in her retirement, plus 26k in the home for a total of 85k. You then divide that in half, which gives her 42.5k. You then deduct the 17.9k from the 42.5k for a total due to her of 24.6k.

Normally you would either pay her in cash, or structure it as a combination of cash and of dividing your retirement account.
 

bd420

Member
I don't understand her retirement.....

LdiJ said:
You have the right theory, but you are off on the math.

You need to add 51k in your retirement plus 8k in her retirement, plus 26k in the home for a total of 85k. You then divide that in half, which gives her 42.5k. You then deduct the 17.9k from the 42.5k for a total due to her of 24.6k.

Normally you would either pay her in cash, or structure it as a combination of cash and of dividing your retirement account.
My math should have been 16.6k, not 14.4k. I don't understand why part of the 24.6k that you came up with isn't her 8k of retirement, why does that get factored in? Technically I get half, which is 4k, and she gets half of mine, which is 25.5k, leaving 21.5k net for her, right? Seems like you counted her retirement and didn't subtract it later?

Or are you saying she's not entitled to keep her retirement, she can offer that up in exchange for cash at a penalty???

Confused as usual :)
 

LdiJ

Senior Member
bd420 said:
My math should have been 16.6k, not 14.4k. I don't understand why part of the 24.6k that you came up with isn't her 8k of retirement, why does that get factored in? Technically I get half, which is 4k, and she gets half of mine, which is 25.5k, leaving 21.5k net for her, right? Seems like you counted her retirement and didn't subtract it later?

Or are you saying she's not entitled to keep her retirement, she can offer that up in exchange for cash at a penalty???

Confused as usual :)
Sorry....I explained that badly...her half of the total assets is 42.5k, and less the debt it is 24.6k however since she already has 8k of that in her possession, the amount you would have to pay to her is 16.6k

Sorry about that.
 

bd420

Member
Whew, no problem, math errors on my side

LdiJ said:
Sorry....I explained that badly...her half of the total assets is 42.5k, and less the debt it is 24.6k however since she already has 8k of that in her possession, the amount you would have to pay to her is 16.6k

Sorry about that.
I can tolerate those! :p
 

bd420

Member
How is debt obligation determined during the settlement?

LdiJ said:
If your name is on the debt...credit cards etc...then the debt didn't happen without your knowledge. You either signed for the debt, or signed to make the credit card/lines of credit available. Therefore its probable (not 100% guaranteed but probable) that you are going to be stuck with 1/2 of the debt.

If the other spouse is not trustworthy regarding paying bills....then to protect your credit you may be better off taking responsibility for ALL of the debt.....because you could end up being responsible for it anyway. If the other spouse doesn't pay what the court orders them to pay the creditors WILL come after you (they are not a party to the divorce)...and your credit will end up taking the hit...or you could even end up having to file bankruptcy.

If there are enough assets (home equity, 401K, cars etc.) that you could keep assets equaling the debt that would be ideal.

In the meantime...you need to be closing each and every one of the revolving lines of credit.
How is debt obligation determined during the settlement?

My wife chose to move out of the primary residence, leaving me with all debt payment responsibilites on 5 Credit Cards, 1 Home Equity Loan, and 1 Primary Mortgage Loan. I decided to maintain residence at the primary household. During the divorce settlement proceedings, is my wife obligated for re-imbursement of 1/2 of these 7 debts monthly minimum payments???

I've been made aware that in regards to the primary mortgage her only obligation may simply be half of whatever equity was gained thru my FULL monthly payments, if so, that would kinda be a bummer. These 7 payments result in a minumum payment requirement of $1688 per month, so half is $844.

Is my ex responsible for any of this, seems like she has to be, I mean, had I also moved out, SOMEONE would have had to make these payments regardless, right?

Also, can/should, I be pro-rating all utility and debt payments made from Dec 1st to Dec 23rd (the last days she stayed in the house) for the purpose of splitting those January made payments for those items?

Thanks,

bd
 

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