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Westlake Village Legal Blog

Divorce and retirement

One of the casualties of divorce is often retirement assets. However, California spouses who get divorced and have to give up a significant amount of their retirement assets may be able to rebuild those assets so that their retirement plans can remain in place.

Many soon-to-be exes receive an unpleasant psychological surprise when they realize that they will have to split their retirement funds. IRAs, pensions and 401(k)s are all subject to division during a divorce, and there are certain legal documents that have to be obtained in order for these accounts to be divided.

Student loan stress can contribute to divorce

While many people recognize the burden that student loan debt can place on millennials' financial lives, the burden that it can place on their relationships and marriages may be less well-known. Student debt can have a significant impact on people's plans for the future, and the numbers can be substantial. The average outstanding loan balance that borrowers have is $34,144, and that number is higher for the class of 2017. These graduates have an average educational debt load of $39,400. These amounts of debt can lead to a great deal of stress and pressure on the borrower as well as his or her relationships.

One survey of student loan borrowers found that significant educational debt can undermine marriages and contribute to divorce. People with student debt may wish to postpone major life decisions like having children or buying a home. In fact, 41 percent of millennials have said that they would choose to buy homes if not for their outstanding debt. In addition, the psychological effects of the debt-associated stress can also undermine the bond between married partners. In the survey, over one-third of borrowers said that student loans, as well as other financial problems, played a role in their divorces. In addition, 13 percent of the divorced participants specifically attributed the end of their marriages to student loan debt.

How child support and alimony is treated in bankruptcy

California residents and others who owe child support or alimony cannot use either Chapter 7 or Chapter 13 bankruptcy to get rid of it. However, Chapter 13 bankruptcy may allow a person to pay the debt over 60 months. A bankruptcy court may also analyze a divorce decree or similar court order and determine that what is classified as a domestic support obligation is labeled correctly.

To be classified as alimony, a payment must be intended to be for the maintenance of a former spouse. However, if it is determined to be a part of a property division settlement, it may be eligible for discharge. Courts may also try to answer questions such as if the payment was actually labeled as support, if it was taxable in nature or whether it was meant to balance income between two former spouses.

Changing a California spousal support order

If you are divorced, living in California and are either paying or receiving spousal support, your situation may change at some point, which may lead you to wonder about changing your existing spousal support order. Maybe you were paying a certain amount in support, but you have since lost your job. Or maybe you have been receiving support but have reason to feel as if the amount you are getting is insufficient. Regardless of your reasoning for desiring a change in spousal support, the process for requesting a change remains the same.

Arguably, one of the most important steps involved in requesting a change to your existing California spousal support order involves requesting the change in real time. Why? A court cannot “back-date” a change to your support order, so if you are looking to change the amount you must pay each month, you will want to start the process as soon as you, say, lose your job or otherwise experience a change in financial circumstances.

More young people are choosing prenuptial agreements

Prenuptial agreements have risen in popularity in California and across the country for people of all ages. However, a particular increase has been evident among the millennial generation. People between the ages of 18 and 34 are more likely to seek a prenup before getting married, according to the American Academy of Matrimonial Lawyers. This recent uptick in interest follows an ongoing trend as the use of prenuptial agreements has multiplied fivefold in the past 20 years. The increase in prenup interest has accompanied an overall decline in marriage interest; only 42 percent of millennials identify marriage as a goal in life.

There are a number of reasons why millennials may be less interested in marriage, but some survey results have indicated that financial insecurity is a major cause. For example, many young people are concerned about underemployment or student loan debt. This is actually a major reason why millennial couples opt for prenups, as these documents allow spouses to lay out their responsibilities for student loan debts in advance.

Damages for distress may be available in willful violation cases

At least four of the U.S. Circuit Courts of Appeals, including the 9th Circuit that includes California, have ruled that damages for emotional distress may be warranted in cases of a willful violation of a bankruptcy's automatic stay. The purpose of the automatic stay of collection efforts is to provide the bankruptcy petitioner with a breathing spell and temporarily relieve them of the financial pressures that led to the bankruptcy.

At 11 U.S.C. section 362(k)(1), the bankruptcy code says an individual who suffers harm due to a willful violation of an automatic stay shall recover damages, which may include attorneys' fees, costs and punitive damages. The code does not specify whether damages for emotional distress may be recovered. The courts that have ruled emotional distress damages are available in cases of willful violation reviewed the code's legislative history and concluded that Congress was in fact concerned with psychological and emotional consequences in addition to financial harm.

Developing parenting schedules

California parents who are no longer together will have to create a parenting schedule that can help their child get accustomed to their new reality. Allocating the responsibilities of child custody is an important part of developing an efficient parenting schedule, but it can also be used to show the children that their parents are willing to work with one another to prioritize the well-being of their children.

Parents who have to make a parenting schedule should keep their children's point of view in mind. Being shuttled between two homes can be difficult as is getting adjusted to not living with both parents. Any decisions about a parenting schedule should only be made after considering how it will impact the children.

Getting a divorce can reduce satisfaction with life

California couples who are preparing for divorce may already be aware that the process can have an impact on their finances moving forward. What they may not know, however, is that going through a divorce may actually be bad for their health. According to a study published in the Annals of Behavioral Medicine, those who get a divorce are more likely to pick up smoking or reduce their amount of physical activity.

A sample of approximately 5,700 individuals was taken from the English Longitudinal Study of Aging. The individuals were adults who were at least 50 years old and lived in the UK. Approximately 900 of these individuals had gotten a divorce and never remarried or were separated. It was found that those who were divorced or separated and did not remarry had a 46 percent greater risk of dying through the course of the study than their married counterparts.

Filing for bankruptcy early on can help avoid difficulties

Bankruptcy can offer a life-changing escape and debt relief opportunity to people in California struggling with crushing debt. While the opportunities presented by filing for bankruptcy can be substantial, people are often hesitant to commit to filing. There are a number of reasons why this is the case: Sometimes, people simply want to see if they can avoid taking the additional step of bankruptcy. Other times, people feel a sense of guilt or shame. However, waiting to file bankruptcy can make a person's debt burden even harder to overcome.

Many experts refer to the period immediately before a bankruptcy filing as the "sweatbox" because the financial stress of that time is so great. Creditor calls and even lawsuits can pile up while people struggle to pay for basic needs like utilities and food. While some people act quickly in the sweatbox period to file for bankruptcy, other people can go through this period for two years or more. Studies show that those who struggle for over two years with these conditions may have significantly worse situations to deal with when they emerge from bankruptcy.

How does divorce affect your credit score?

When it comes to divorce, most couples focus on the impact it has on their children, location of residence and income. This perspective makes sense considering these are immediate, life-changing consequences of splitting up a marriage.

However, other effects are just as important to be aware of to understand and prepare for them. One of these is your credit score. What exactly does divorce do to your credit?

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