Use numbers: when settlement isn’t settling
Mike and Karen are getting a divorce. In Karen’s initial consultation, I discovered that they owned a $300,000 house with $100,000 in equity. They each had 401(k) accounts, earned entirely during the marriage, worth about $125,000 each. They had about $60,000 in savings, and $5,000 in their checking account. They had personal property, too, of course—TVs, computers, kitchen appliances, furniture, and so on. They also each owned cars—he a 2010 Toyota Tundra, worth about $15,000, and she a 2008 Mercedes, also worth about $15,000.
Between the equity, the retirement accounts, savings and checking, personal property, and cars, there are assets worth about $445,000 to divide in the divorce.
Of course, I’m keeping the numbers simplistic, but I want to make a point here. On the date of entry of the final divorce decree, the value of the marital assets will be roughly the same. There isn’t going to suddenly be a lot more money or assets there to divide.
Today, I’m just talking about how the money works; custody and visitation, of course, are a separate discussion entirely.
So, what do Mike and Karen do? They have a couple of options when it comes to divorce.
Uncontested No Fault Divorce
So, in Mike and Karen’s case, there’s about $450,000 in assets to divide. Karen knows she needs help, and prefers not to handle her case on her own.
She meets with and ultimately hires an attorney for an uncontested no fault divorce. She understands that an uncontested no fault divorce means that her attorney will attempt to draft a separation agreement—a legal contract formally dividing all the assets and liabilities of the marriage—and stay out of court. Karen pays her attorney a $2,500 retainer. Her attorney bills hourly, as work is done, so her case could cost more or less, depending on how many time she and her husband make changes to their agreement.
She and her attorney prepare a draft separation agreement and send it over to Mike, who hires an attorney (also to the tune of $2,500) to review the draft, make revision and edits. After a couple drafts go back and forth, Mike and Karen are satisfied. They sign the agreement. They can’t do much more until they’ve been separated for a full year (since they have two children under the age of 18), so they wait. When the year is up, Karen signs another retainer—this time for the actual uncontested divorce. The money that she had left over in her trust account from drafting the separation agreement rolls over into her uncontested divorce account.
All told, Mike and Karen spend between $3000 and $5000 negotiating the agreement. (Though it’s possible to spend more or less, Mike and Karen had a couple revisions—but not too many—during the process.) They then split the cost of an uncontested divorce, which is usually roughly $1,500. Their separation agreement specified that Karen would file for the uncontested divorce, but that Mike would reimburse her for half of the legal fees she incurred doing so.
All told, Mike and Karen’s divorce cost somewhere between $4,500 and $6,500 total. But it’s quick, efficient, and, at the end of the day, they don’t hate each other. They’re still able to co parent, and consistently put their children’s needs first. It’s a difficult experience (heck, it’s always difficult), but not insurmountable. They feel that their attorneys counseled them well, and that the ultimate result was pretty fair.
Contested Divorce
Mike and Karen can’t stop fighting. They can’t agree about how anything will be divided. It’s a constant fight, and they’re both drained and exhausted. Karen knows she can’t handle her case on her own; it’s already gotten too ugly. She meets with and ultimately hires an attorney for a contested divorce. Her attorney charges a retainer fee of $7,500.
Her attorney drafts a complaint and files for a fault based divorce in Virginia Beach. The complaint is served on Mike, who hires an attorney, too (and charges a $10,000 retainer). Karen’s attorney schedules a pendente lite hearing, where she tells Karen that temporary child and spousal support will be determined, along with restraining orders that prevent Mike from harassing or bothering her at work, from “wasting” the marital assets (buying or selling too much, basically), and so on.
Her attorney spends several hours, at $300 an hour, preparing for the hearing. She talks to Karen, too, to prepare her, and puts together several exhibits related to the family income to establish a basis for requesting temporary spousal and child support. She gathers evidence related to the children, to show the court that Karen should have temporary custody, too. All told, she spends 4-5 hours preparing. Then, she calls Mike’s attorney to see if they can settle before court. They negotiate back and forth but—ultimately—can’t reach an agreement.
They go to court on the day of the hearing. Karen and Mike’s case is on the docket at 9am, and Karen’s attorney asks her to get there no later than 8:30. Karen’s attorney is there by 8:15, and when she sees Karen, whisks her off into an attorney/client conference room, and prepares her for the upcoming hearing. When Mike and his attorney arrive, Karen’s attorney speaks briefly to them. When it appears as though settlement isn’t going to happen, Karen, her attorney, Mike, and his attorney go into the courtroom and wait for docket call.
When their case is called (after the judge takes the bench at 9:30), both Mike and Karen’s attorneys stand. The judge says, “I’ve got several criminal cases that I’m going to hear first. Can’t you settle this?” With a dismissing wave, he sends all four back out into the hallway to attempt to re-negotiate.
After several more hours of back and forth, Mike and Karen and their attorneys are frustrated, but they’re closer to an agreement. The judge’s first criminal hearing is still going on—and there are still two more after. They could go wait for the judge—with no guarantee of a better result—but they press on instead, hoping to reach an agreement.
Finally, around 2pm, they’ve reached an agreement. When Karen’s attorney goes into the courtroom with the proposed pendente lite agreement for entry by the judge, there’s still one more criminal matter to be heard.
After spending 4-5 hours preparing for the hearing, and 5 and a half hours at the hearing, both Mike and Karen have spent close to $3000 on the pendente lite hearing—each.
And that’s not all—there are lots of other procedural things that will come up, taking time and costing money. They’ll have judicial settlement conferences, pre trial conferences, briefs and more due to the court. They’ll have to prepare and issue discovery, and then analyze the discovery responses received from the other side. If the other side misbehaves, there may be several motions, too.
Most contested divorces settle, but not always. After going through all this back and forth, though, both Karen and Mike are angrier than ever—and the legal bills are mounting.
By the time of their final divorce hearing, Mike and Karen have spent (easily) $30,000-40,000 each.
They walk away from the process stressed out, angry, and resentful. Neither feel like the result is particularly fair, and are shocked that they received so little of their former assets.
Of course, I’ve painted an ugly picture of a contested divorce—but I’m not really sure that there’s any other way to paint it. In my experience, people almost always walk away angry—and they certainly walk away with less of the marital assets than they would have had otherwise.
I mean, think about it. If Mike and Karen had spent $6,500 of their $445,000 in assets, they still have $438,500 to divide—split roughly in half, each would walk away with $219,250.
If, on the other hand, Mike and Karen spent $80,000 or more on their divorce, they have $182,500 to divide—a pretty big difference.
Settlement gets a bad rap. People, for some reason, look at is as “settling”—which, truthfully, it is—but not in a bad way. If you and your husband can reach an agreement, it’ll be easier for you in the long run. You’ll save money, experience more satisfaction with the process, and be more able to tolerate each other later on down the road (which is important if you have children together).
Things seem contentious at first; that’s normal. But that doesn’t mean you need to jump headfirst into a contested divorce. Give it some time. Try to negotiate. Enlist the support of an attorney and, if necessary, a therapist to help both of you as you work through some of the more hot button issues.
Don’t do it for him, though. Do it for you. Do it for the sake of your brand new fresh start, which will be considerably easier with more assets at your disposal rather than less.
For more information or to talk over your divorce options, give our office a call at (757) 425-5200. Hope to hear from you soon!