Limiting a Spouse’s Spending & Debt During Divorce
In many relationships, there may be a disconnect in the approach one spouse has towards spending versus saving. While this may cause significant issues during the marriage and possibly may lead to divorce, it is especially important to reign in any frivolous dissipation of assets once a party is filing for divorce.
At the serving of the petition for divorce, Automatic Temporary Restraining Orders (ATROs) go into effect essentially freezing the assets and ability to incur additional debt without the other party’s consent.
This does not always deter spenders who are operating under the pooling and sharing method of income and expense management during the pendency of divorce.
Under this method, both parties continue to carry on their finances as if they were still married. This allows either party to incur additional expenses that may not be approved of or additional debt on credit cards that increases the liability of the other party regarding that debt repayment.
How does one party help manage these expenses and limit the debt?
It is highly recommended that if this is a major concern of one party, that the date of separation be adhered to and each party becomes responsible for all expenses and have full access to their own income post the date of separation. This may mean that temporary support be awarded in which one party supports the other through the pendency of the divorce proceedings.
The amount of support is calculated according to the California guideline support formula. This allows each spouse to have their “own” separate property income and be responsible for each of their own expenses. It is a clear and distinct way to resolve any issues about spending and eliminates any concerns about the other spouse’s liability.
If temporary support is not implemented, and the parties are pooling and sharing, then other constraints must be implemented. First, before filing the petition for divorce it would be ideal to have a credit report on each party to confirm any credit that may be unknown to the other party. Along with these reports, placing a credit freeze on the concerned spouse’s account will disallow any further liabilities to be accrued.
For all credit cards in which the concerned spouse is the primary holder and the expenditure spouse is an authorized signer, the primary credit card holder should remove the authorized signer spouse.
If parties are pooling and sharing, rather than complete access to the income without guardrails for spending, it is helpful to have an account for both parties to contribute equal or proportional income at pre-set amounts. That account would also be used for pre-identified expenses. Having explicitly defined income and expenses controls the income dedicated to community expenses.
Another way to control expenses is to implement an early division of assets. Each party would receive an equal amount of assets to use at their discretion. This essentially implies a freeze on the other assets and allows for the parties to each have excess assets that they can use for their own discretionary spending. It protects other assets from dissipation without the consent of the other spouse.
It is sometimes difficult to control a spouse’s spending habits during a marriage and even more difficult during the pendency of divorce. While these guardrails may assist in controlling spending during the pendency of divorce, they may not be enough to control the spouse, but they are a start at constraining the dissipation of marital assets.
This article does NOT constitute legal advice and is for general information purposes ONLY. Prior to making any decisions, seek legal counsel from a licensed attorney.
