Thursday, March 21, 2013

What is a clean break?

Lots of people hear this term when they are contemplating divorce and separation but they do not know what it means.

What it means is that there is an end to any claim you or your ex spouse can have against each other.

In order to finalise financial matters on divorce a Consent Order is needed. Without this claims can remain open indefinitely.  One man won the lottery 10 years after getting divorced and ended up having to pay some to his ex wife as they never filed a Consent Order with the Court. 

A capital clean break means that any agreement reached on capital, such as transfer of the house, a lump sum payment, or each keeping your own savings, is final and you cannot go back to court to ask for more or less.Unless of course there has been fraud or mistake.

There are 2 caveats:

If the lump sum is paid by installments it is possible to ask for the payments to be varied - usually asking for them to be reduced or cancelled.

If there is an intervening event of such magnitude that the court would have made a different order had it been made aware of it at the time. The fluctuations of the market - such as losing your company on the stock exchange - even if the value was millions of pounds do not qualify as an intervening event.  Your ex spouse committing suicide does. Such an event has to happen within 12 months of the Consent Order being sealed by the Court.

It is also possible to seek further capital if you have a maintenance agreement - your ex spouse pays you income every month and a variation is sought.  At this stage the court can look to compensate the party who is losing the maintenance by capitalising it - that is - making a further capital award.

In order to obtain a clean break on income you need to have no ongoing maintenance payments.

The court has a duty to consider a clean break in every case.

Each case however is different and the road to financial independence may take longer for some or may never happen and lifetime maintenance payments can be made.

Often the court will not order a clean break if the lower earning party has young children to support.  Instead a nominal maintenance order can be made but that is the subject of another post....

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