A “Do it Yourself” Divorce May Cost you Dearly

Sarah Files for Divorce and John Keeps the Majority of the Money

John worked for a company for many years and had built up a 401(k) worth three hundred thousand dollars. His wife, Sarah, filed an action against him for an absolute divorce using some forms she found online. When John came to me for legal advice, we made a list of the property that he and his wife acquired during the marriage.

• Former Marital Home [Joint] $ 245,000
• Mortgage [Joint] ($ 175,000)
• 401(k) [John] $ 300,000
• His Car [John] $ 14,000
• Debt on His Car [John] $ 0
• Her Car [Sarah] $ 18,000
• Debt on Her Car [Sarah] ($ 8,000)
• Checking Account [Joint] $ 2,300
• Net Marital Estate $ 396,300

If either filed for equitable distribution and the Court agreed that the above listing accurately represented the property acquired during the marriage, it would be presumed equitable for each side to get property worth ½ the overall value or $198,150 each. However, if a divorce occurs without each side properly preserving their claim for equitable distribution then property vests based upon title. Therefore, under the facts above, John would keep his 401(k) and car worth $314,000 and Sarah would keep her car and the debt on her car worth $10,000. The joint property would be held as tenants in common with each having an undivided interest in the whole. John could sue Sarah after the divorce to divide the house with $70,000 in equity and potentially have a total of $349,000 (1/2 the equity in the house plus the 401(k) and car) while Sarah would only get $45,000 total. In theory, the checking account could also be divided through a petition to partition personalty but it probably would not be worth the cost. So it is to John’s advantage to get divorced without suing for equitable distribution. Actually, he comes out better by over one hundred and fifty thousand dollars!

Very little of it was jointly titled and most of it was in John’s name. The 401(k) like most retirement plans was solely in his name. My advice for his particular case was “let her get the divorce and then we will file a petition to partition the real property.”

The entry of a divorce judgment forever cuts off claims for the division of marital property (equitable distribution) and spousal support (post separation support and alimony). The failure to specifically apply for these rights prior to the entry of a divorce judgment acts as a waiver of these rights and they are lost forever. North Carolina law, N.C. GEN. STAT. § 50-11(e), states that “an absolute divorce obtained within this State shall destroy the right of a spouse to equitable distribution.” To preserve claims for equitable distribution and alimony, a valid claim must be asserted before entry of the divorce.

So be careful when filing for divorce in North Carolina. It is worth it to consult with an attorney and determine the best option for your particular situation. A simple divorce could cost you hundreds of thousands of dollars! It also cuts off alimony rights and if John would owe Sarah alimony in the above hypothetical, she would be in even worse shape!  In this case, Sarah made a huge mistake.