Managing Finances: Collaborative Divorce vs. Litigation

In a recent post in my other blog (Divorce and Family Law in Tarrant County, Texas), I wrote about an article that originally appeared in Divorce360.com. It was advice about how to manage your finances in a divorce. It was obviously written from the perspective of a litigated divorce instead of a Collaborative divorce. There were a few points that I would have explained a little differently, but the article overall was very helpful. Later, I looked at the article from a Collaborative perspective and it was amazing how different my comments would be. The following are the main points raised in the original post, with my comments and explanations showing the contrast between litigation and Collaborative Law.

1. Know what you have. Instead of figuring this out when the divorce is ending, in Collaborative cases we start exchanging information during the first or second meeting. In addition, we often bring in a neutral financial professional (FP) who helps both parties gain an understanding of the assets, liabilities and future needs for both parties. My experience is that the Collaborative parties generally end up with a much greater knowledge of their finances because it is so openly discussed and professional help is utilized.

2. Think about where you're going. Again, this is done at the outset and reviewed often during the Collaboration process. The parties usually start at the first joint meeting discussing and recording their respective goals. Throughout the process, they refer back to the goals to make sure they are still on track to accomplish their goals. That is almost never done in a litigated case. In litigation, the parties usually just stake out arbitrary positions and try to get to another arbitrary position. Rarely do the parties in litigation spend time developing their goals or targets and the strategies to accomplish them.

3. Keep track of your credit rating. Again, that's pretty good advice. In a Collaborative case, the parties fully disclose their finances from the beginning. If desired, either or both parties can obtain their credit records to review. And then they would share that information with their spouse.

4. Save something every month. That's good advice, once the divorce is over with. Most people going through a divorce will spend a while adjusting to a new financial situation. The most common challenge is how to support two households on the same income that was basically consumed supporting one home. Still, with a financial neutral helping the parties create a plan and a budget, the parties are in a pretty good position to start saving. In a litigated divorce, the parties are usually on their own and often lack the information, skills and motivation to start saving. Many parties in a Collaborative divorce make saving one of their important goals, so they discuss it and plan for it from the beginning.

5. Close all joint accounts. This is done by agreement at an appropriate time in a Collaborative divorce, after discussion among the parties and neutral financial expert.

6. Educate yourself about money. That certainly happens in a Collaborative divorce. It's often true that one party in a divorce knows more about the finances than the other party. In a Collaborative case, the process provides an education for the party who starts out with less knowledge. Besides having an attorney advisor, each party gets copies of all the financial records that are relevant and, in most cases in North Texas, a neutral financial professional is involved. The FP helps to educate the parties about what assets and liabilities there are and what opportunities are available. In litigation, the neutral FP is missing, so understanding the finances is often much more difficult.

7. Don't panic. Panic is usually not an issue in a Collaborative case. The parties work with specially trained attorneys, a neutral communication coach (usually a mental health professional) and a financial professional in a less stressful and more effective environment than is available in litigated divorces. On the other hand, it is understandable how parties might panic in a litigated divorce with its lack of support and highly stressful atmosphere. Setting goals, gathering and analyzing information and then making decisions with the aid of knowledgeable professionals seriously reduces the possibility of panic.

Clearly, many of the valuable bits of financial advice given for a litigated divorce simply don't apply in the Collaborative Law context. The concerns found in litigation are no longer significant in the Collaborative approach.