Guides & Advice

Will the impacts of coronavirus affect my divorce financial settlement?

Published: 25th November 2020
Area: For the individual
COVID-19 is undoubtedly continuing to have a huge impact on people and their families, particularly those that are in the process of going through a formal separation.

Statistics published last week from the Office for National Statistics show there was 108,421 divorces in 2019 - an increase of 18.4% from 2018 and the highest since 2014 (when 111,169 were granted.)

Although these figures are from 2019, advice charities have reported that they’ve already seen the effects of the coronavirus pandemic and the huge strain it is putting on families. Therefore it’s not unfeasible that we’ll see a surge in divorces this year too.

Dealing with the practical, legal and emotional process of a separation is difficult and stressful enough as it is, without the added complexity of a pandemic. So if you are currently going through the process of divorce, how might the current situation affect this?

I am in the middle of negotiating a financial settlement with my spouse but my financial situation has now changed. What can I do?

You may be doing this either through solicitors or in court proceedings. During this process, there is a duty for both parties to provide what is known as ‘full and frank financial disclosure’. However, given the challenging times we all find ourselves in, it is likely that the disclosure you have already exchanged reflects a much healthier previous financial position and therefore may need to be reviewed.

For example, if there has been a sudden change of income then this may affect how much one spouse is able to borrow by way of a mortgage to ‘pay out’ the other. It could also lead to revisions of property valuations.

Can furlough pay affect a divorce financial settlement and maintenance payments?

It’s currently not uncommon for individuals to seek to reduce their maintenance payments if they’ve been placed on furlough and are therefore receiving a lower income.

While this should be considered as part of any conversations around financial stability and the ability to make payments, couples need to be cautious about entering into agreements without future a review when the reduction in income ends. Both parties need to be realistic that, depending on the industry, it could be a while before the usual level of income resumes.

What if I have only just obtained a financial order?

Your financial order will have been based on what the parties’ financial position was at the time the order was made, which is likely to have been long before the global coronavirus outbreak, and therefore may no longer be feasible

For example, if the order directed one spouse to pay spousal maintenance to the other, but they have since lost their income overnight, they may be unable to pay. Or, it may be that the order set out certain timescales for the transfer of certain assets which can no longer be complied with.

It looks like my spouse may be declared bankrupt. What can I do to protect my position?

If bankruptcy hasn’t occurred yet then you should try and agree on a financial settlement, or make a court application as soon as possible before the bankruptcy process begins. This is because, once proceedings begin, almost all of the assets of the bankrupt person are no longer theirs – instead they are owned by the trustee in bankruptcy.

In financial remedy proceedings on divorce, the court has powers to redistribute assets and income between spouses following the breakdown of their marriage, in accordance with the needs of the spouses and what the court considers to be “fair”. This can lead to conflicts between your interests and those of the trustee in bankruptcy.

For example, if the matrimonial home is jointly owned by you and your spouse, the house cannot be transferred into your sole name without the consent of the trustee in bankruptcy. This is why timing is crucial and it’s important to protect your position now before this situation occurs.

If the bankruptcy is already in effect then the process can be fairly complicated and legal advice should be sought as to what applications can be made.

If my spouse is declared bankrupt, is the money that has already been paid to me protected?

Unfortunately, if money was paid under an order before your spouse was declared bankrupt (and if it was paid in implementation of an order of court), the trustee can ask for the order to be recalled. They are also able to do this any time up to five years from the date of the order being granted. If the recall is granted, the trustee in bankruptcy can recover the money that has been paid to you by your spouse.

What if one of us is a business owner?

As family lawyers, we frequently advise on cases where at least one party is a business owner and therefore the business accounts are subject to detailed examination and valuation. Given the financial impact of COVID-19 is having on business owners, previous forecasts and valuations of stocks and shares may also need to be revisited.

The last eight months have brought a great deal of uncertainty over assets, such as income, pension value, stocks and shares, etc., and it is becoming increasingly difficult to conduct valuations. A recent case saw a judge apply a 10% discount to the trading value of the husband’s business on the basis of COVID-19, as well as the anticipated impact of Brexit.

How can I get help?

If you are in any doubt that your court order may be affected by a change in circumstance then you should speak to a professional and seek legal advice. An application can be made to the court on the basis of there being a “subsequent event, unforeseen and unforeseeable at the time the order was made, which invalidates the basis on which the order was made”.

If this is applicable to your situation then a court application should be made without delay. Family court hearings are still taking place on a priority basis as they have quickly made arrangements for these to be held remotely, e.g. by telephone or Skype.

You are not alone

We understand that this may be a difficult and uncertain time for you – we’re here to help and support you throughout the process. Whatever stage you’re at, don’t panic! – Our team of family law experts will help you understand your options and advise you on the best possible outcome and protect your position from outset.

Contact us

For advice and support contact Monica Ghai or complete our enquiry form and we’ll call you back to arrange a free, 20 minutes no-obligation confidential consultation at a time to suit you.

From inspirational SHMA Talks to informative webinars, we also have lots of educational and entertaining content for life and business. Visit SHMA® ON DEMAND.

Our free legal helpline offers bespoke guidance for any queries on family and private matters. We also have a team of experts on hand for a range of subjects, from employment and general business matters through to director’s responsibilities, insolvency, restructuring, funding and disputes. Available from 10am-12pm Monday to Friday, call 0800 689 4064.

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