Thinking out loud here...split of retirement during legal separation??

[julsmom]

So I have been advised by a divorce atty that my husband is entitled to 50% of my retirement account ...>I am now wondering out loud here, could this maybe be our fresh start? If we could come to agreement & put it in writing, since we are legally separating, he would get the money from my retirement (which it seems on my reading, they pull from my account as soon as they get the court order & issue that to him) which we could then agree to voluntarily dismiss the CH13 & pay the creditors, assuming the CC's & medical woudl settle for less than what is owed, we have enough to pay the secured & then part to the CC's & then we just walk away. I let the house go & go rent. But then we are no longer tied to each other for the next 4 plus years to finish this CH13 together. I don't even know if that would be feasible. I see that if he were to request the retirement & we are still in the 13, the trustee would go after it anyhow (like a lottery or something??) so I'm wondering if this would work. It is just too much to take all this in.

[lrprn]

julsmom, let's see if I have this straight....

1. You and your husband are planning to separate and then divorce.
2. A divorce attorney told you your husband is entitled to 50% of your retirement account. (Just curious - why?)
3. You hope that if you dismiss your 13 that your creditors will settle for less than they are owed.
4. You think that if you dismiss your 13, divorce your husband and he gets 50% of your retirement account, then he will agree to use his 50% to pay off your mutual debts.

I have to say that that's a lot of assumptions. Number 4 is the one that would make you the most vulnerable because after the divorce and he gets the money, it's his money to do with what he wants. He could walk leaving you with your debts.

Sounds like it's time to set up an appointment with your lawyer to discuss the options here. Married people who file a joint 13 sometimes do get divorced before their plan is over - we've had a fair number of those couples right here in this forum. Odds are there are other approaches that are far simpler and more straightforward than the ideas you have proposed here. One would be to dismiss your 13, divorce, and then file 7s (if you both qualify). But you need sound legal advice to figure out what's going to work best for *YOU* personally in this unfortunate situation.

[Flamingo]

I am assuming you are both in a Chapter 13 right now and for some odd reason your exempt retirement will possibly have to be given to your then ex-husband under the terms of a divorce settlement....You need to discuss all this in more detail witih a divorce attorney because whatever is in your retirement account during your 13 is exempt from your creditors and if it has to be taken out to satisfy a divorce settlement, who is gong to be resonsible for all the penalties and taxes that you will be hit with, reducing the amount of funds available? I suggest getting the best legal advice possible here from both your Chapter 13 attorney and a divorce attorney before you move any money out of your retirement fund.

[LadyInTheRed]

2. A divorce attorney told you your husband is entitled to 50% of your retirement account. (Just curious - why?)

I'm guessing Viriginia is a community property state. So, any earnings contributed to a retirement account (or any employer contributions) during marriage is community property.

The retirement plan would not necessarily need to be distributed in order to split it, so it could be kept exempt. The divorce order needs to be drafted correctly to protect the wife from tax liability if the husband does make a withdrawal. Here are some articles on the topic: http://www.smartmoney.com/personal-f...accounts-9671/

http://www.expertlaw.com/library/family_law/qdro.html

http://www.somersetcpas.com/newsletters/2008SummerLit/LITarticle3.Print.htm

[lrprn]

I'm guessing Viriginia is a community property state.

Actually Virginia is not a community property state - see http://www.fairmark.com/spousal/comprop.htm for the list of states that are. That's why I was curious why the lawyer told her that her husband is entitled to half her retirement. Still am curious

[LadyInTheRed]

Actually Virginia is not a community property state - see http://www.fairmark.com/spousal/comprop.htm for the list of states that are. That's why I was curious why the lawyer told her that her husband is entitled to half her retirement. Still am curious

That made me curious too, so I did a little research instead of just guessing like I did before. Living in a community property state, I've always assumed that a non-community property state goes by the theory "what's mine is mine and what's yours is yours". But, even in an equitable distribution state you can have "marital property", it just isn't an automatic 50/50 split like in community property states. This site has each state's property laws: http://www.divorcenet.com/states/nat...ision_by_state

On VA pensions:

Pensions

Pensions are marital property to the extent that they were earned during the marriage, before separation. The marital share is a percentage, based on a ratio of months of marriage in which they were earned compared to all months of unmarried or separated pension-earning. Courts usually divide the marital share in half. In some cases involving military or foreign service families, special federal laws apply about when courts can divide pensions, and how much each spouse can get. In contrast, when parties settle their cases out of court, they often provide that each will keep their own pension.

[RunningMan]

But as lrprn pointed out, why would the husband agree to it? Julesmom has posted in an earlier thread that they visited their attorney and that her husband would qualify for a chapter 7 and she would have to file a chapter 13 because of her income. Her husband could just roll the retirement money into an IRA and file chapter 7.

[julsmom]

Sorry haven't been able to get back to follow up...so it is possible that he can file CH7, at this point we don't know. The advice I was given was that since the majority of the retirement funds were earned while we were married, it would become part of the "marital property" ruling. So he could be entitled to a portion (up to 50%). We aren't sure yet if he qualifies for 7, it seems to be a lot of confusing about our entire case & we cannot get clear answers. Let me try to shed a little more light...filed CH13 together last summer to save house & combine all debt (all our debts were marital debt) got approved for lien strip on house, so that would wipe the 2nd, we still had ARM on the 1st that we have been unable to get modified or refi since we owed on the 2nd. Our thoughts were we could afford the extra for the ARM to reset this summer & stay in house together. My car was outside plan, his inside. Within a month of filing though, he got a new job making twice what he had been...so we had to go back & amend plan to fix this, and reset the payment. All that was done. He is now self employed so has to pay self employment tax, etc. Now 6 months into plan we are now just getting confirmed & we have separated. He just signed lease on apartment & has moved out. So...now what to do? I can't afford the reset on the ARM myself to be here alone, he now has 2nd HH expenses, it is just a huge mess. So we want to know, and were told we had to wait until now that he is getting settled in apartment & we can go back to our ATTY & have all the #s redone. They were using his income from the 6 months prior to us filing (remember he still had job where he didn't make much) so for that, then he would qualify 7 & could walk away. I would POSSIBLY have to stay 13 with my income now as family of 3 (it is CLOSE like within 2K close..so I want to fight & try to give back house, walk away & go 7) I could stop paying 1st mortgage, save money for deposit & rent & get out this summer. That's the current plan. BUT IF i have to stay 13 because of income, I want to reset the plan payment & I don't know how they could count his giving me child support against me (since I haven't been getting that the past 6 months) Husband questions how he would go 7 with his income now...wouldn't they have to take into account what he now makes... not just the job 6 months prior. SO...yes my thought was on retirement that if we were to have to split, could we make our own agreement on trying to settle. But yeah....I see the point & have thought of that, he could tell me heck no.But...so that being said, even if he goes 7 & walks away, I was told that all debt was still marital so he will still owe 1/2. so what we are currently planning is he is going to pay me 1/2 of the CH13 plan payment (which like I said, I'm hoping to get lowered). My biggest fear in all this was my ATTY (who that was a whole other post how I got religious advice not legal!) said that it was possible I could end up losing my home, renting a place that was much less a month & then once trustee factors in my child support, I could end up with a higher plan payment. That was very scary & depressing!

[RunningMan]

I am having a hard time following you. Are you saying your plan is to stay in your current chapter 13, each pay half, surrender your house, and get your payment lowered? You said your husband was going to pay you half the 13 payment, but I assume you meant he was going to pay it to the trustee. You said your husband is newly self employed? That means his income is not fixed and is not equivalent to the gross income of the business. If I were him, I would load up the legitmate business expenses (office lease, office supplies, computers, employees, etc) to reduce my income back to the chapter 7 level.

[Pandora]

So I have been advised by a divorce atty that my husband is entitled to 50% of my retirement account .........If we could come to agreement & put it in writing, since we are legally separating, he would get the money from my retirement (which it seems on my reading, they pull from my account as soon as they get the court order & issue that to him) which we could then agree to voluntarily dismiss the CH13 & pay the creditors, assuming the CC's & medical woudl settle for less than what is owed, we have enough to pay the secured & then part to the CC's & then we just walk away. I let the house go & go rent. But then we are no longer tied to each other for the next 4 plus years to finish this CH13 together. I don't even know if that would be feasible. I see that if he were to request the retirement & we are still in the 13, the trustee would go after it anyhow (like a lottery or something??) so I'm wondering if this would work. It is just too much to take all this in.

First - VA doesnt recognize "legal separation" - they will however recognize the Property Settlement Agreement that has to be filed with the courts. Since there are children involved, its 1 year separation before you can be divorced. During that timeframe, you both must agree to division of marital assets, however the judge can order that nothing be touched until the divorce is final. This is something you have to ask your lawyer(s) directly.

As for your retirement - have you calculated in what the penalty will be for early withdraw as well as tax implications? While its true that a spouse has the right to retirement / 401K / etc of the other, it doesnt mean that its equally divided here in the state; it simply means that its equitable distribution which doesnt mean "50/50" on everything marital, as would be the case in a community property state. Big difference between the two types and given you make more than he does - he could essentially receive more than you once the marital property is looked at. Would suck if you had to pay him spousal support.

I agree with RunningMan; its a bit hard to follow what you're attempting to do. Why not look over your schedules and buget, see what your DMI is (if you let the house go - you'd have rental expenses) and see if you result in a CH. 7.