LIQUIDATING ASSETS BEFORE DIVORCE

You have likely heard the phrase “liquidating your assets” before, but you may not be familiar with what it actually means. When an individual or company liquidates their assets, they are selling things of value in order to make a cash profit. This selling of assets is typically done to pay off debts to creditors. 

An asset may be anything, aside from cash itself, that has monetary value. This may include, but is not limited to, any of the following:

• Real estate
• Property (land)
• Vehicles
• Jewelry
• Art
• Equipment
• Electronics
• Machinery
• Tools
• Furniture
• Financial investments

Businesses may turn to liquidation of assets when they are closing or otherwise restructuring. The company’s inventory is usually the collection of assets that are liquidated. Often, these assets are sold at a steep discount. 

On the other hand, when an individual liquidates their assets, they may do so to pay off debts or simply because they need some extra cash. A mistake that some individuals make is attempting to liquidate their assets before divorce. Whatever the case may be,  liquidating your assets before a divorce is NOT a good idea.

When going through divorce proceedings, both spouses are required to disclose all financial information. This is imposed by a legal document called a Financial Affidavit or Financial Statement. Included in the statement must be all assets, such as property, income, salaries, stocks, and businesses. The statement must also include all liabilities and debts, such as loans, mortgages, and credit card debt.

The purpose of a Financial Affidavit is for the court to assess a couple’s split and individual wealth and help them determine how it should be divided. It also helps them determine the amount of alimony and child support required, if applicable.

Someone might choose to hide their assets before a divorce for a few reasons. Most of the time, all of these reasons are completely understandable, but still, we strongly advise you against taking this route.

One of the common ways that someone may try to hide their assets is by liquidating them. This is simply because it is much easier to hide cash than it is to hide property. For example, you can’t necessarily hide an entire vehicle as one of your assets. It would be much easier to liquidate it and hide the cash instead.

Removing marital property before divorce, such as the liquidation and hiding of assets, can be risky. In fact, the risk often outweighs the return. Part of a divorce attorney’s job is to make sure the other party is not hiding any assets from their client. If the lawyer finds these hidden assets, and they typically do, the guilty party will end up facing serious consequences.

Spouses who are found guilty of hiding assets are also found guilty of perjury for lying on the Financial Affidavit, which is a punishable crime in itself. In addition to a potential perjury charge, you may also face severe sanctions. In some cases, the court awards the entirety of the hidden liquidated asset to the opposite spouse, as well as any related attorney fees. In this case, the individual attempting to hide and save money for themselves typically ends up owing even more than they might have originally saved.