If you are married, divorcing, and therefore ending your marriage, does not automatically also deal with the financial aspects of your separation. A divorce and the resolution of financial matters are two separate parts which should be dealt with although they do run alongside each other. Only when you have a binding court order which is approved by the court in relation to the finances can the division of assets, liabilities and income be considered full final and binding.
The court can only approve a financial settlement once you have reached conditional order stage in the divorce. Whilst reference is made to a court approved financial settlement, this does not mean that you necessarily need to go to court to get the approved order. There are many ways to reach a financial settlement, and if you are able to reach an agreement on an amicable basis about the finances, the court order can be approved on paper by the court without anyone attending.
There are a number of different options available to you to help with resolving the finances as set out below.
Negotiation
You can negotiate between you or through solicitors to see if an agreement can be reached. Within the negotiation process, it is a helpful exercise to exchange financial disclosure so that you get a clear picture of the financial pot so that you are both in agreement with the figures, and what finances there are to divide between you. A summary of the finances needs to be provided to the court with a consent order in any event to make it full, final and binding.
We can also act for both parties in negotiation where appropriate, through a process called resolution together. Further details can be found here.
Mediation
You could attend mediation with a trained mediator who will assist you both in resolving the finances. A mediator will ask you both to provide your financial disclosure to see if you can reach an agreement together. You are not bound by an agreement you reach in mediation until you seek legal advice on the terms of this and it is put into a form of a proposal which is accepted. If attending mediation does not help you reach an agreement, hopefully you will narrow the issues between you. Please be aware that the court will expect you to enter into mediation before you make an application to the court to deal with the finances on a contested basis. You must have attended mediation within four months prior to the issue of an application to the Court. In some cases, there are exemptions to attending mediation for example if you are a victim of domestic violence.
Arbitration
Arbitration is where a third party (a qualified lawyer who is neutral and independent) hears evidence from both parties, and makes a decision as though they were a Judge at a final hearing. The decision of that person is final and binding. The process brings about finality without having to go through the court process.
Court process
If other forms of dispute resolution do not enable you to reach an agreement, you would need to make an application to the court to deal with the finances. The court then puts a structured timetable in place usually with up to three court hearings, although there are usually less if an agreement can be reached during the process. It also gives you certainty that the finances will be resolved. If you reach the third court hearing (known as the final hearing) without reaching an agreement, the Judge at that hearing will hear evidence from you and your spouse before making a decision which will be binding on you both. There is always a risk of proceeding to a final hearing as you can never guarantee what a Judge will order.
Private Financial Dispute Resolution (FDR) hearing
As part of the court process, or outside the court process, it is possible to “hire” a barrister or retired Judge to give an indication about how they would resolve the finances as a means to encourage the parties to reach an agreement. This is equivalent of a court based Financial Dispute Resolution Hearing which is usually the second of three hearings in financial remedy proceedings. The advantage of a private FDR over a court based FDR is that you get to take control of the process including the day, time, place and Judge. You also have the benefit of a specialist person acting as a Judge for the day whereas within the court process, one Judge often has many cases in one day to deal with.
Seeking legal advice if you reach an agreement by negotiating or mediation
If you reach an agreement by negotiation or mediation, you should seek legal advice upon the terms of that agreement and if advised, the next step would be to proceed with incorporating the terms of the agreement into a consent order. The consent order would then be referred to a Judge (after the Conditional Order has been pronounced in your divorce). Once a Judge has reviewed the order and approved it, this gives you a legally binding order in relation to the finances so that you can move forward in the future with the certainty that the finances have been resolved.
You should be aware that if you do not incorporate the agreement into a consent order which is approved by the court, this means that there is always a risk in the future that your spouse could make further claims against you.
If you need any support regarding financial aspects relating to separation please contact our Family Law team and we would be happy to help.