Nolo's Essential Guide to Divorce - Emily Doskow [118]
The Complete Guide to Buying a Business and The Complete Guide to Selling a Business, both by Fred Steingold (Nolo), explain valuation in detail and can help you if you're considering a buyout or a third-party sale.
If possible, find someone who has experience in the industry. Accountants, appraisers, actuaries, and lawyers are all good sources of help. The National Association of Certified Valuation Analysts at www.nacva.com, can help you find a professional.
A website at www.valuationresources.com lists different resources that can help you work toward a reasonable valuation of a family business in the context of your divorce.
Dividing Debt
It's a rare married couple that has only assets and no debt. And just as you are required to divide all your assets, you need to deal with your debt including determining what you're both responsible for and what's separate. The same general rules that govern assets also apply to debt.
What's Marital and What's Separate
If you live in a community property state, you're responsible for debts incurred during your marriage whether or not your name is on them. If you live in an equitable distribution state, debts in your spouse's name should be considered your spouse's alone. However, even in those states you are responsible for debts your spouse took on in your name without your knowledge. The only exceptions are:
• if the credit was used for items that only your spouse would use, and you didn't know about the purchases, or
• if the debt was incurred in anticipation of the divorce and with the intention of making you responsible for it in the period before you and your spouse separated, in which case most courts would not force you to pay any share of the debt. But it can be difficult to prove just what a spouse had in mind.
As an example, if your spouse made a big purchase with a credit card that has your name on it, without your knowledge, you may end up responsible for the debt. The judge will look at all the circumstances of how the debt was incurred, including whether you consented to it at any point, and whether you-or your kidsbenefited from what was paid for. This means that if your spouse used a credit card to buy expensive furnishings for your oldest child's first dorm room, you may be held liable for the debt even if you would have purchased the furniture for much less. But if the debt was incurred to buy sporting equipment or expensive clothing that only your spouse would use, you might be able to persuade the court to consider it a separate debt and get your spouse to pay it. (The credit card company, however, will still consider it a joint debt.)
Education loans are a special type of debt. If you got a student loan before you were married, it's yours to keep at divorce. If you were using joint funds to pay it off, consider it a gift from your marriagebut the rest of it is now your sole responsibility again.
If you took out a student loan during your marriage, in most cases you and your spouse are jointly responsible for it. However, if you used the loan funds only to pay for educational expenses and you divorced before your family got the benefit of your education, some courts will give you full responsibility for the remaining balance on the loan.
Handling Joint Debts
The most common and best way to deal with joint obligations is to pay them off-either with the proceeds of the sale of the family home or with other available assets. This strategy has numerous advantages, including ease, certainty, protection of your credit record, and the opportunity to make a clean break and a fresh start.
Because a house very often changes hands in a divorce, the transaction may give you the chance to take out enough cash to deal with your debts and allow