Do I Need a Financial Order for Divorce?

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Do I Need a Financial Order for Divorce?

In most cases, you will need a financial consent order in a divorce. To help you decide what action you may need to take, our family law and divorce experts take a look at what a financial consent order is and how it can provide you with certainty and peace of mind for the future.

A financial consent order is a document that sets out the financial agreement a divorcing couple or couple dissolving a civil partnership has reached. It is only valid if it has been drawn up correctly and has been approved and stamped by the family court. The contents of the document will vary to reflect the individual couple’s financial circumstances and the nature of their agreement. For example, it could provide for the family home to be sold and define what share of the proceeds each party will receive. It might simply say that neither party has any further financial claim against the other’s income and assets. Alternatively, the financial consent order could be a lengthy document dealing with the payment of maintenance, multiple family trusts or the transfer of shares in a family business.

Are There Different Types of Financial Order?

There are several types of financial orders that can be made by the court in the context of divorce or dissolution of a civil partnership:

  • Lump Sum Order: a court may order one party to pay a lump sum of money to the other. This could be in one go or by instalments.
  • Property Adjustment Order: this deals with the ownership of property. The court could order the sale of a property and decide how the proceeds will be divided between the parties, or the court could transfer ownership of a property from one party to the other.
  • Spousal Maintenance Order: also known as a 'periodical payments order', it involves one party paying maintenance to the other. This can be for a specified period, until one of the parties dies or until the receiving party remarries. A spousal maintenance order is separate to child manteinance. Child maintenance is usually arranged through the Child Maintenance Services however, there are limited circumsntaces in which it may be addressed by the court.
  • Pension Sharing Orders: pensions can be complex assets to divide. A pension sharing order splits a pension between both parties, creating a separate pension for the spouse who does not own the original policy. Alternatively, the court may grant a Pension Attachment Order and, rather than splitting the pension at the point of divorce, the pension benefits of one part must be paid to the other when they become payable.

What is a clean break?

A clean break is a financial settlement upon divorce where neither party has any ongoing financial obligation to the other. The clean break can begin in after certain actions have been taken (e.g. after a property has been transferred or certain payments have been made) or immediately, depending on the situation.

Anyone who gets divorced or dissolves their civil partnership becomes entitled, in principle, to make financial claims against their spouse or civil partner. What would ultimately happen if a claim was made would depend on a whole host of considerations. However, those claims remain ‘live’ forever. A simple consent order drafted by a solicitor and approved by the court can change this and ensure that any financial ‘loose ends’ will not cause trouble in future.

Life is unpredictable and the unexpected can happen. Couples who divorce but do not enter into a financial consent order could find themselves in difficulty years or even decades later because of the uncertainty caused by not dealing properly with the financial aspects of their split.

The 2015 Supreme Court case involving Dale Vince and Kathleen Wyatt saw wide news coverage. The couple were virtually penniless when they divorced and they did obtain a financial consent order approved by the court. Mr Vince, who started out as a New Age traveller, then went on to build a multi-million pound sustainable energy business. The Supreme Court confirmed Ms Wyatt’s right to make a financial claim against Mr Vince, 30 years after their split. This is an extreme case, but it underlines the fact that financial claims upon divorce never disappear unless a financial order is in place.

Few people become multi-millionaires, but many build up pensions, savings and equity in property as they go through life, which could become vulnerable to claims by a former spouse if things are not dealt with properly at the point of divorce.

Do Divorcees Need a Financial Order If They Hold No Assets?

Even if you and your spouse don't believe you have any significant assets to divide, it's still advisable to obtain a financial order. In circumstances where there are limited or no assets, a 'Clean Break Order' is likely to be appropriate. Without a legally binding financial order, either party could make financial claims against the other in the future, regardless of the current situation. A Clean Break Order provides the peace of mind that comes from knowing neither party can make any future financial claims.

This situation is common and is one where a consent order is very important. Even after ownership of the house has been transferred, a couple’s financial claims against each other do not come to an end. A consent order recording the agreement to transfer the house to one party in exchange for a payment to the other would bring such claims to an end and ensure that the clean break they both want remains a reality.

The number of people declared bankrupt in Britain each year is around the 100,000 mark. If you have stayed in the family home and bought out your spouse and they later become bankrupt, you could be forced to make payments towards the bankruptcy or even have to sell the property. A consent order entered into at the time of the divorce is the best legal protection against this happening and represents a worthwhile investment.

Are Court Proceedings Necessary if Both Parties Agree to All of the Terms of the Financial Order?

If a financial agreement has been reached, then there is no need for the court to become actively involved. The court’s role is limited to reading through a copy of the financial consent order alongside a short form giving very brief details of you and your partner’s financial situation. Provided the order has been drafted correctly and your agreement is reasonably fair, it will be stamped and become binding as soon as your divorce is finalised.

What Should Divorcees Do if They Can’t Agree On Anything?

Even if you and your partner are finding it difficult to reach an agreement face to face, there are many alternatives to help you sort things out. One option is to attend mediation. Provided the agreement you reach is later set out in the form of a financial consent order, this could be a good way to achieve a settlement and ensure it is legally binding. Negotiations can also be undertaken via solicitors by letter or through various kinds of settlement meetings, and the process can be tailored to suit the individual dynamics of the situation. As long as any agreement reached is turned into a financial consent order then it’s up to you how you get there.

What Happens If One Party Breaches the Financial Order?

If one party fails to comply with the terms of a financial order, the other party has the right to take legal action to enforce it. The specific course of action may depend on the nature of the breach. For example:

  • Lump Sum and Property Orders: if a lump sum payment or property sale/transfer hasn't been made as ordered, the court can demand its payment and even impose penalties such as interest on the overdue amount. The court can also “step into the shows” of one of the parties and sign documentation transferring property to the other party.
  • Maintenance Orders: if maintenance payments are not made, the court has a range of enforcement options, including orders for an employer to deduct payments directly from the defaulting party's wages. Persistent non-payment could result in fines or, in extreme cases, imprisonment.
  • Legal costs: in some cases, the party in breach of the financial order may also be ordered to pay the legal costs incurred by the other party in enforcing the order.

The time it takes for a financial consent order to be approved by the court varies depending on the complexity of the financial arrangements, the cooperation level between parties and the court's schedule.

Once both parties have agreed on the financial settlement, a Consent Order is drafted by solicitors. This process can take anywhere from a few days to a few weeks, depending on the complexities involved.

After the consent order is drafted and signed, it must be approved by a judge. This usually takes around six to 12 weeks but can vary depending on the court’s backlog.

Importantly, a Financial Consent Order is generally not legally binding until the final order (formally known as the Decree Absolute) in the divorce or dissolution has been issued. While the order itself might be approved by the court, it won't usually take effect until the marriage or civil partnership has been formally ended.

Once the order is legally binding, the time needed for its implementation - such as the sale of property, transfer of assets, or initiation of maintenance payments - depends on the specific terms of the order and how quickly both parties act on it.

Talk to Us

If none of these methods of dispute resolution will work for you, there is the option of asking the court to make a decision. To discuss this with the team please call us on 0345 872 6666 or fill in the contact form. Alternatively, you can read more about financial settlements here.

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