Layla Babadi

Divorce Rate Slowing Due to Cost of Living Crisis, Explains Family Law Expert
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Divorce Rate Slowing Due to Cost of Living Crisis, Explains Family Law Expert

Published on
Layla Babadi
Layla Babadi
Senior Associate
Roythornes Solicitors

The current cost-of-living crisis has seen soaring energy, food, fuel and interest rates, but has also seen an impact on divorce. Layla Babadi, senior associate in the family team at law firm Roythornes, considers the impact of the economic crisis on divorce and what couples should be aware of to reduce costs and strain during a separation.

“According to property site Zoopla, couples are being forced to live together for an average of 1.3 years after they split, with one in eight continuing to share a bedroom, due to financial constraints. 

“When a relationship breaks down, there are emotional and financial implications, where eventually the household finances will need to be shared between two. Both sides will feel the pinch and with a cost-of-living crisis, the whole family is impacted.

“When you separate from your partner, you must navigate splitting your money, property, pensions, and debt. Fears about being worse off, coupled with the uncertainty around spiralling legal fees, might lead you to question whether you can afford to divorce given the current economic climate.

“The first thing to acknowledge is that since the introduction of the “no-fault” divorce in April 2022, the legal process has become much simpler. You can complete the paperwork yourself on the Government website and there is a £593 fee to pay. This works for couples who are splitting amicably or possibly have less complex reasons behind the split.

“However, the part that deals with how you split your finances is separate, and often what causes the most issues. This is where working with a solicitor can help you.

“It is worth noting that how you choose to sort out your money and property impacts how much your divorce will ultimately cost. For example, a court battle involving barristers and solicitors is likely to cost tens of thousands of pounds. On the other hand, if you and your spouse reach an agreement yourselves, then that agreement can be made legally binding by instructing a solicitor to turn your agreement into a consent order, for the court to approve. In this scenario the costs are considerably less.

“A second factor that may impact divorcing during the current crisis is timing. A common misconception is that the court will consider your financial position at the time you separated. However, courts look at your financial position as it is when you divorce, not separate. This may mean your financial position is very different at these two timestamps and could end up costing you more or complicating your tax position.

“However, perhaps the bigger consideration is the impact on your emotional health and the well-being of the wider family. It might be that despite tough economic conditions, the better long-term option for the family is for the parents to divorce, especially if there is a high conflict home environment. Financial difficulties and uncertainty will always add pressure to relationships, and if your marriage has already broken down it can make living conditions toxic.

“There is no simple or correct approach that suits all couples, which is why at Roythornes we give the right advice from the outset, to avoid costly errors having an impact on the final outcome. A crisis is tough for all, but we aim to reduce the stress and hardship involved.”

Click here for more articles by Roythornes.

About Layla Babadi

Layla is a Senior Associate at Roythornes. She qualified as a solicitor in 2005. Layla is also a member of Resolution. Before joining Roythornes, Layla was a Legal Director at a leading East Midlands firm.

Layla specialises in divorce and separation, with a particular emphasis on international divorce law. She also advises on pre and post nuptial agreements and separation agreements.

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Is a pre-nup enforceable
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Is a pre-nup enforceable?

Published on
Layla Babadi
Legal Director
Solicitor
Nelsons

2022 has been a landmark year for family law, with the introduction of the ‘no-fault’ divorce law coming into effect on 6 April removing the need to prove a relationship has broken down.

Meanwhile, many couples across the country are still waiting to tie the knot following Covid-related postponements and delays to their wedding day.

Although a pre-nup may appear unromantic on the surface, I discuss why now is the time for these couples to consider putting one in place.

What are pre-nuptial agreements?

A pre-nuptial agreement, or pre-marital agreement, is an agreement made by a couple before they marry or enter into a civil partnership. It sets out how they wish their assets to be divided should they divorce or have their civil partnership dissolved.

Pre-nuptial agreements are not automatically enforceable in English and Welsh courts.

Commonly associated with the rich and famous, pre-nuptial agreements can often be sensationalised by news stories. This has led to widespread belief that the agreements are unfair, worthless and unromantic, when in fact they can be a sensible, fair and transparent way to discuss financial matters and agree the outcome in the event of separation.

What does the court say?

In 2010, the Supreme Court held that courts should give effect to a pre-nuptial agreement that is freely entered into by each party with a full appreciation of its implications, unless, in the circumstances prevailing, it would not be fair to hold the parties to their agreement.

The ruling does not make pre-nuptial agreements binding in all cases, but the fairness of upholding any particular agreement will be considered by the court on a case-by-case basis.

However, some pre-nuptial agreements will now have effect in the absence of circumstances, which would make this unfair.

In February 2014, following consultation, the Law Commission published its final report, Matrimonial Property, Needs and Agreements.

Among other things, it recommended the introduction of “qualifying nuptial agreements” as enforceable contracts, which would enable couples to make binding arrangements for the financial consequences of divorce or dissolution.

These agreements, which would have to meet certain requirements, would not be subject to the court’s assessment of fairness. Couples would not be able to contract out of meeting the financial needs of each other and of any children.

Growing in popularity

While not everyone will want to contemplate the end of a marriage or civil partnership before it has even begun, pre-nuptial agreements are certainly gaining in popularity as a good way of helping couples decide what should happen in the event of a divorce.

The creation of a pre-nuptial agreement also requires that certain formalities are observed, which can help provide further peace of mind for both parties. For example:

  • The agreement must be entered into by both parties without any pressure from one party on the other;
  • An agreement signed within 21 days before the marriage or civil partnership is generally regarded as inappropriate;
  • Both parties must fully appreciate the implications of entering into the agreement. Before any agreement is signed, each party must be fully aware of the financial position of the other;
  • Individuals should both take independent legal advice before entering into the agreement from a specialist family lawyer;
  • The agreement must be fair, making provision for any children and future children. It must meet the needs of the parties and any children;
  • Reviewing the pre-nuptial agreement if there are any changes in circumstances, such as the birth of any children.

Three golden rules

As with any formal paperwork relating to relationships, the prospect can be somewhat daunting.

However, there are three simple and easy-to-follow pieces of advice that we recommend couples follow when deciding to get a pre-nuptial agreement:

  1. Don’t leave it until the last minute

Explore the topic early on and don’t wait until the week before the wedding to discuss a pre-nuptial agreement. You will have enough to worry about as your big day approaches, so plan ahead.

  1. Think with your head and not with your heart

It is difficult to talk about a loving relationship as if it were a business arrangement. You and your partner need to think logically, rather than emotionally about the preparation of a pre-nuptial agreement.

  1. It’s not just about protecting the “wealthier” partner

Traditionally, a pre-nuptial agreement determines the fate of assets that each party brings to the marriage. But the agreement can also address debt obligations, future inheritance and gifted financial resources from outside of the marriage. Both of you stand to benefit from having the agreement in place.

A pre-nuptial agreement does not have to be an unromantic, daunting or depressing task. An agreement can often help couples better understand exactly where they stand at the start of or during a marriage or civil partnership and in the event of divorce.

Hopefully, the agreement will never be needed, and a couple will spend many happy years together.

Click here for more articles by Nelsons

About Layla Babadi

Layla is a Legal Director at Nelsons. She qualified as a solicitor in 2005 and joined the Family Law team in 2015.

Layla specialises in divorce and separation, with a particular emphasis on international divorce law. She also advises on pre and post nuptial agreements and separation agreements.

You might be interested in

Divorce and bankruptcy
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Divorce and bankruptcy: Double trouble

Published on
Layla Babadi
Legal Director
Solicitor
Nelsons

Divorce and bankruptcy have been two big topics in recent times.

The impact of Covid-19 has resulted in companies going under, leaving employees without a job, and couples being cooped up in lockdown together – but what happens when these two, already stressful, situations happen at the same time?

Bankruptcy

Bankruptcy is a legal process through which people, or other entities, who cannot repay debts to creditors may seek relief from some or all of their debts.

The bankruptcy application process must be followed very carefully and the application submitted, after completing the necessary form and paying the fee (currently £680) to become bankrupt. At this point, it’s over to the adjudicator to make a decision.

The adjudicator has 28 days to decide whether to make a bankruptcy order or to reject the application. On the basis that the adjudicator decides to make the bankruptcy order, it is at that stage that you are officially declared bankrupt and your bank or building society accounts will be frozen immediately.

Divorce

You can get divorced in England and Wales if all of the following apply:

  • You have been married for more than a year;
  • Your relationship has permanently broken down;
  • Your marriage is legally recognised in the UK; and,
  • The UK is your permanent home or the permanent home of your husband or wife.

When you apply for a divorce, you need to prove that your marriage has broken down irretrievably and prove one of the following five facts:

  • Adultery;
  • Unreasonable behaviour;
  • Desertion;
  • Two-years separation with the other party’s consent; or,
  • Five years separation without the other party’s consent.

The Government’s Divorce, Dissolution and Separation Act 2020 will reform the divorce process introducing no-fault divorce. The new legislation, which is due to come into force on 6 April 2022, will replace the five facts with a new requirement – to provide a statement of irretrievable breakdown, remove the possibility of contesting the divorce, and introduce an option for a joint application.

In order to get a divorce, there is a court fee of £593, although some applicants will be eligible for help with fees, and a separate application can be made in this regard.

Has Covid-19 had an impact on divorce and bankruptcy rates?

Bankruptcy rates

Figures from the Insolvency Service Official statistics show that, during 2020, there was a 25% reduction in people going bankrupt compared to 2019. Quarter three of 2021 has also seen a fall of 33% compared to the same quarter in 2020.

The decrease in the number of bankruptcies in quarter three of 2021 has almost certainly been assisted by an increase in the number of people starting a Debt Relief Order (DRO). A significant relaxation of the DRO qualification criteria from June 2021 has made this cheaper alternative more accessible.

That being said, the total number of bankruptcies and DROs is still likely to be lower overall than during 2020. This suggests mass financial hardship predicted by some at the beginning of the pandemic may have been avoided.

Divorce rates

The Family Court’s quarterly statistics, published on 25 March 2021, show that:

  • Between October and December 2020, 28,672 divorce petitions were filed, which was up five per cent on the equivalent quarter in 2019.
  • There were 23,810 decree absolutes, the legal document that ends a marriage, granted in October to December 2020, a decrease of 24% from the same period last year.
  • Annually, there were 111,996 divorce petitions filed and 97,068 decree absolutes granted throughout 2020, down four per cent and 11% respectively from 2019.

Despite the news seemingly reporting a rise in divorces during the pandemic, it seems that, according to the statistics, the annual figures don’t coincide with this and divorce rates are pretty similar to pre-pandemic levels.

However, with Covid-19 not going away anytime soon, and with continued restrictions putting a strain on both business and homelife environments, discussion around dealing with bankruptcy and divorce could become more frequent in the months ahead.

What is the process of divorce and bankruptcy?

When a property, or any other type of asset, is owned jointly by a divorcing couple and one of the parties has been declared bankrupt, the property or asset cannot be transferred to the other party as part of the financial settlement in the divorce proceedings without the consent of the trustee who is dealing with the bankruptcy.

The trustee is responsible for handling all the assets and income of the party that has been declared bankrupt. They deal with the assets in a variety of ways in order to pay the creditors of the bankrupted party. This will be the main consideration of the trustee.

What happens if one party is declared bankrupt during a divorce?

What happens with regard to finances depends largely on whether and when the bankruptcy petition has been filed.

Prior to a bankruptcy petition being filed, the court retains its full power and discretion with regards to finances and divorce. For example, debts need to be taken into account and consideration should be given to options such as negotiating a reduced lump sum towards the debt or instalments to repay the debt and financial orders are binding upon trustees in bankruptcy

Thought should also be given to the financial position if a party is made bankrupt. This is particularly the case if the debt is in one party’s name and is more than the value of the assets in their name or joint names. Sometimes, bankruptcy is the best option as it addresses the debt while preserving what is left of the matrimonial assets.

Ideally an agreement will be reached as to a division of the assets, but, if the parties are unable to reach an agreement, the court may make a final order in financial remedy proceedings. This can result in an unequal division of the matrimonial assets if, for example, it is necessary to meet needs. I

f that order provides for a property to be transferred to a spouse, either outright or on the basis that it will be subject to a chargeback payable at some point in the future, that order will take effect upon pronouncement of decree absolute, the final order that concludes the divorce process.

The impact of a bankruptcy order

Once the bankruptcy order is made, the court has no jurisdiction to make a subsequent property adjustment order transferring or ordering a sale of a matrimonial property. If a property adjustment order has already been made but not implemented before the bankruptcy order, it is still binding on the trustee, as long as the decree absolute has been pronounced to make the order effective under section 24(3) of the Matrimonial Causes Act (MCA) 1973.

Lump sum orders (an order that one party pay a certain amount to another, are a provable debt in a person’s bankruptcy meaning that a spouse can prove in the bankruptcy as a creditor and will be entitled to participate in any distribution of the bankruptcy estate. Other financial obligations are not provable but survive.

The court does have the discretion to release a party from lump sum obligations post-bankruptcy under section 281(5) of the Insolvency Act 1986, which it may do in circumstances where there is no likelihood of satisfying it. For example, if there is a lapse of time since the order was made and where it may be used as a source of harassment to the discharged bankrupt.

Financial provision and property adjustment orders under the MCA 1973 are valuable rights conferred and recognised by law, whereby one spouse will give and the other will receive consideration.

A negotiated agreement to settle an application for financial provision is not a disposition because it is subject to the court’s discretion in deciding whether accord has been reached. The agreement only becomes effective when the order is made.

A court order comprising an application for financial provision and property adjustment is a disposition by the individual and not the court. The order has the effect of vesting beneficial ownership in the recipient and section 284 will apply if the disposition is at the relevant time.

In the case of Robert v Woodall [2016], the trustee in bankruptcy sought to set aside a consent order under section 284.

A petition was presented against the husband on 9 March 2009, the consent order was signed on 5 June and approved by the court on 16 July. The husband was made bankrupt on 7 July, therefore the court held that the provisions in the order for periodical payments from the husband to the wife and the children were void under section 284.

The right under section 24D of the MCA to apply for financial relief constitutes consideration and, therefore, once a court has made an order or approved a consent order, the trustee cannot seek to challenge it under section 339 of the Insolvency Act unless there has been collusion or fraud, mistake or misrepresentation.

In the case of Sands v Singh [2016], the husband bought a property in 2006 for £976,000 and married two years later in 2008. The husband then spent £200,000 on building work and, apparently, owed a further £913,719 plus VAT. In January 2009, the husband charged the property to secure a £500,000 loan from his father. In July 2009, the wife instructed divorce lawyers and registered home rights under the Family Law Act 1996.

In April 2010, the husband charged the property in favour of his sister for the sum of £70,000.

A divorce petition was issued on 17 September 2010 with both parties signing a consent order in December 2010. The terms stated that the husband would put the matrimonial home on trust for the children, pay £375 per child per month, be responsible for the mortgage, pay a lump sum of £50,000 and have the rights of occupation. The wife moved into the property and decree absolute was granted in February 2011. £50,000 was received in June 2011 and the husband was adjudged bankrupt in September 2011.

It was held that the trustee in bankruptcy had made out his case was a sham as no evidence had been provided that there had ever been a loan; there was no evidence of collusion or that the husband’s sister was aware of her husband’s financial difficulties.

The negotiations took a long time to conclude as the husband did not agree to the wife’s proposals immediately. The court, therefore, could not conclude that a matrimonial court would not have made the consent order and, as such, that it would be set aside as a transaction at an undervalue.

What happens to the assets?

When a property, or any other type of asset, is owned jointly by a divorcing couple and one of the parties has been declared bankrupt, the property or assets cannot be transferred to the other party as part of the financial settlement arising from the divorce proceedings without the consent of the trustee who is dealing with the bankruptcy.

As long as no bankruptcy petition was filed before the decree absolute, the order will be binding even if the property has not yet been transferred. If the spouse transferring their interest is subsequently adjudged bankrupt, the trustee in bankruptcy is also bound by the order.

In the event that a bankruptcy petition is filed before the decree absolute is pronounced by the court, then the entirety of the bankrupted party’s estate will rest in the trustee in bankruptcy, and the court is unable to make a property adjustment order without the validation of the bankruptcy court.

What about bankruptcy after a divorce settlement?

Subsequent bankruptcy can also cause issues with regard to lump-sum payments that have yet to be paid. While these debts can be sought through bankruptcy, unlike other debts, the spouse is not released if they are not paid when they are discharged from bankruptcy.

Other orders that are made in matrimonial proceedings include pension sharing or attachment orders, which are not affected by bankruptcy, and maintenance but the payer’s ability to pay can be restricted if they are required to pay an element of income to the creditors.

Can the non-bankrupt spouse apply to annul the bankruptcy order?

If the one party made themselves bankrupt on their own petition and it appears that they did so in order to defeat a family finance order, the other party may, in some circumstances, apply to annul the bankruptcy under section 282 of the IA 1986 on any grounds existing at the time the order was made that mean it shouldn’t have been. The court may annul a bankruptcy order whether or not the bankrupt has been discharged from bankruptcy.

However, a court will only be prepared to annul the bankruptcy when it can be shown that the individual was not insolvent on either a cash flow or balance sheet basis at the time of the bankruptcy order. It is immaterial what the motivation was for presenting the petition.

The evidential burden of demonstrating insolvency will shift, if the other party can show that assets exceed liabilities. The individual will then need to prove they were unable to pay the debts as they fell due.

Don’t forget

When it comes to bankruptcy and divorce, it is important to remember the outcome is dependent on when the bankruptcy and divorce have been filed.

There are also numerous other factors that need to be taken into consideration such as property, matrimonial assets and financial provisions, as well as being able to annul the bankruptcy in certain circumstances.

In an ideal world, divorcing parties should reach a financial settlement prior to either party being declared bankrupt. However, separation, divorce and the issues concerning breakdown in relationships are often complex. For this reason, it’s always advisable to consult a specialist family solicitor at the earliest opportunity in order to discuss these matters, take the appropriate advice and necessary action.

Click here for more articles by Nelsons

About Layla Babadi

Layla is a Legal Director at Nelsons. She qualified as a solicitor in 2005 and joined the Family Law team in 2015.

Layla specialises in divorce and separation, with a particular emphasis on international divorce law. She also advises on pre and post nuptial agreements and separation agreements.

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Pension during divorce
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Pensions during divorce: The forgotten factor

Published on
Layla Babadi
Legal Director
Solicitor
Nelsons

In recent years, January has come to be unofficially known as ‘divorce month’ due to the number of couples looking to separate once the festive period is over and the new year arrives.

However the process can be a daunting prospect, as divorce brings with it a number of factors to be considered, and one of these that is commonly over looked is pensions.

According to a survey carried out by Which? in December 2021, just 15% of divorcing couples included pensions in their financial settlements.

The largest asset

Pensions are, usually, the biggest asset for divorcing couples, making up 42% of household wealth – according to the Office for National Statistics (ONS) – followed by property, which makes up 36%.

Therefore, the importance of discussing pensions as part of divorce proceedings is paramount to ensuring that neither party is left with a lower income.

Sections 25(2)(h) and 25B(1)(b) of the Matrimonial Causes Act 1973 (MCA 1973) requires the court to have regard to the benefits under a pension arrangement that, by reason of dissolution of annulment of the marriage, a party to the marriage will lose the chance of acquiring.

The considerations

It is important to understand the full range of options available when dealing with pensions, and the implications involved. It is essential to understand the nature and value of pension rights, the ways in which the rights can be apportioned and the ensuing implications for the parties.

Where pension funds are a material part of the assets, consideration should be given to:

  • The nature of the pension fund(s);
  • The uses to which the pension fund(s) can be put;
  • The manner in which the court’s powers can be used to fit the future needs of the parties; and,
  • The appropriate use of experts – for example, independent financial advisers and/or pensions experts – to gather relevant information, interpret that information and consider the effect of the exercise of the court’s powers on the parties.

Often, parties may wish to equalise their retirement provision by sharing the available pension resources. A party may intend to draw a tax-free lump sum at retirement, which represents capital, and, usually, the rest of the pension fund will be accessed as deferred income. If a pension is already in payment, it can be treated as current income.

50:50?

Unsurprisingly, every single case is different and there’s no one size fits all approach when it comes to dividing up assets.

Splitting the pension 50:50 will not necessarily produce equal pension income on retirement. This can be for a number of reasons, not least the respective ages and life expectancies of the parties, and the commercial reality of what the pension credit will buy the pension recipient in terms of income on retirement.

Another approach can be to provide the pension recipient with a percentage split that will equalise pension benefits on retirement.

In many divorce cases, an equal sharing of pension rights will not produce a fair result because of the parties’ needs, ages, length of the marriage or because the pension rights are non-matrimonial assets.

To that end, there are several different options available to separating couples when it comes to splitting pensions.

Pension offsetting

Pension offsetting is the process whereby the value of the pension resources is set against the value of other assets held between the parties. Offsetting does not involve the court making any pension orders. The pension rights remain with the pension member. It works by adjusting the distribution of non-pension assets to take into account that one party will have a less valuable pension provision.

It can often be used in cases when one party wishes to retain the family home at the expense of future pension provision. It is also an option where the pension rights cannot be shared, for example an overseas pension.

Pension sharing

Pension sharing is the method by which an existing pension arrangement is split and divided between the parties following divorce, nullity or dissolution proceedings.

A pension sharing order transfers a part or the whole of a pension from one party to the other, giving the recipient a separate pension fund that can be invested in the same scheme, or in another external scheme, subject to the relevant scheme rules.

Pension attachment orders

A pension attachment order requires the person responsible for a pension arrangement to pay a percentage of the pension income, and/or pension commutable lump sum, and/or death benefits available to one party when a pension becomes payable to the other party. In this way, the recipient attaches to the existing pension arrangement.

When it comes to pensions and divorce there are numerous outcomes that need to be considered and it’s for this reason that it’s always advisable to consult a specialist family solicitor at the earliest opportunity to discuss these matters and ensure the best resolution for all involved parties.

Click here for more articles by Nelsons

About Layla Babadi

Layla is a Legal Director at Nelsons. She qualified as a solicitor in 2005 and joined the Family Law team in 2015.

Layla specialises in divorce and separation, with a particular emphasis on international divorce law. She also advises on pre and post nuptial agreements and separation agreements.

You might be interested in

Divorced abroad

I got Divorced Abroad, is it Valid in England?

Published on
Layla Babadi
Solicitor
Nelsons Solicitors

When it comes to divorce and family law, different countries’ approaches can vary enormously.

Recognition of a foreign divorce is important as it can affect your ability to remarry and cause issues in relation to wills and inheritance, welfare benefits, marital status, and the financial remedies available to the parties involved.

My divorce was dealt within a European Union (EU) country – do I have a problem?

Divorces granted in EU member states will more than likely be acknowledged in England. Certificates of divorce that are properly translated and certified are valid across the whole of the EU.

What if my divorce was dealt with outside the EU?

This is where you may have a problem – divorces dealt with outside of EU member states may be more difficult to prove valid.

The Family Law Act 1986 generally qualifies between divorces which have taken place through a court order that is equivalent to that in England. In some countries, divorces may be dealt with outside of court and may not be as formal – this runs the risk of your foreign divorce not being considered valid in England.

What criteria must be met for my foreign divorce to be valid in England?

In order for your foreign divorce to be valid in England, the order itself must be valid under the law of the country in which it was obtained. Secondly, you or your ex-partner must legally be considered as a resident or national of that country when the order was sought.

When might a foreign order of divorce be refused recognition in England?

There are a number of reasons why a divorce might be refused. Just one example is that there may not be an official certificate documenting the divorce or it could be that one party member was not able to participate in the proceedings.

Obtaining recognition of your foreign divorce in the UK can be extremely complex and I strongly advise anyone who is unsure to contact a legal professional in the UK to ensure their divorce is valid and there could be no repercussions down the line.

About Layla

Layla Babadi qualified as a solicitor in 2005 and joined Nelsons in 2015. Layla specialises in divorce and separation, with a particular emphasis on international divorce law. She also advises on pre and post nuptial agreements and separation agreements.

 

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