Divorce and Financial Disclosures

The attorneys at Plog & Stein, P.C., are well abreast of the requirements set forth by Colorado statute and the courts related to divorce. One of the most important steps required by the courts relates to financial disclosures. Most people who have had a divorce or child support case will remember the tedious part of the case related to financial disclosures, yet they may not quite understand the importance of them.

Pursuant to Colorado Rules of Civil Procedure, Rule 16.2(e)(2), the basic list of documents to be provided in a divorce or child support case is:

1. Sworn Financial Statement, which is a comprehensive document, to be drafted by you or your attorney, setting forth income, assets, debts, and monthly expenses.
2. Last 3 months pay stubs.
3. Last 3 years personal and business (if applicable) tax returns.
4. Personal and busniess financial statements (I have yet to have a private person do a personal financial statement, thus this generally only applies to people with businesses).
5. Current bank statements.
6. Current debt statements, which includes credit card or other debt statements.
7. Current investment statements.
8. Current retirement account statements.
9. Documents related to real estate.
10. Documents regarding any insurance policies.
11. Documents regarding any vehicles.
12. Documents regarding day care expenses.
13. Documents regarding employment benefits.

These disclosures are generally required to be exchanged by the parties by the initial conference date in your divorce case or custody case, which generally will occur within 40 days of the case being filed, or as set forth by the court in a child support case. As you can see, the rules provide for complete financial disclosure. The purpose of this rule is to ensure that both sides have a clear picture of the other’s financial situation for purposes of settlement, or so that each side and the court has a clear picture for purposes of a contested hearing.

As divorce deals with not only child support, but the division of assets and debts, it is important for there to be financial transparency between the parties. It is not uncommon for the attorneys at Plog & Stein to have cases in which one party or the other has been the one who has primarily dealt with the income, control of the accounts, payment of the bills, etc. Thus, the other party may have almost no knowledge as to expenses, income, or the holdings of the marital estate. In the olden days, it was often the wife who was in the dark. Today, husbands are sometimes the ones lacking financial knowledge. Our Denver divorce lawyers often hear that the one who controls the finances is a controlling and secretive person related to such. Courts are keenly aware of the games that can go on with finances and the fact that one person may be completely in the dark. As such, most Denver area divorce courts will not sign off on the decree, thereby granting the divorce, until they know that both sides have completed their financial disclosures.

As relates to child support, whether in a child support case or a custody case, the disclosures also matter. Though assets are not being divided, attorneys may often need to see the assets and debts of the other party for purposes of trying to ascertain if there is hidden income or additional income that would also go into a child support calculation. The list of disclosures in these cases may not matter when both people have regular jobs. In such cases, the attorneys may really only need to see pay stubs, sworn financial statements, tax returns, day care documents, and proof of health insurance. The remainder of the list becomes important in instances in which one party is self employed, underemployed, or claims to be unemployed, yet magically seems to financially survive with no visible source of income. In essence, your family law attorney is trained to figure out monthly income for child support purposes from looking at assets and expenses as well. Thus, those things may matter.

Beyond courts holding up hearings or final orders, or getting upset with parties who fail to make their financial disclosures, there are broader ramifications of not doing financial disclosures properly and/or related to the timing of getting them done. We have seen both sides of divorce cases in which the parties arrive at an agreement, get that agreement put into writing, sign on the dotted line without having exchanged their financial disclosures, and submit the agreement to the court. Of course, this is done without attorneys involved. The problems arise when one party wakes up and says, “hey, wait a minute, this agreement is wholly unfair.” If financial disclosures were not done properly and the court determines that the agreement is, in fact, unfair or unconscionable, the court can toss the entire agreement and make the parties start over again. I have litigated this issue as a Denver divorce lawyer from both sides of the coin. Parties to a divorce need to recognize that, technically, once the final divorce agreement (called Separation Agreement) is signed, the statutory presumption is that it is a binding contract as to property, debt, and potentially alimony. Therefore, never sign a final divorce agreement until you know you have full financial disclosures from the other side. Also, never presume you will bind the other side to that agreement if you did not make full financial disclosure. Great cost can arise from litigating these types of matters.

Finally, should one side fail to make full financial disclosure, the Rule also allows for a continuing jurisdiction on the part of the court for 5 years after the divorce decree enters, over any property that is discovered later, meaning it was not previously disclosed. Believe it or not, people do actually try, once in a while, to conceal assets. Now you know what you need to provide and receive from the other party. Your Denver family law attorney can help you understand those disclosures and how to use them to help you in your divorce or child support case.