In every divorce there is going to be a financial settlement that must be approved by the court. Even if the parties agree that each will take what they own and agree not to have either pay the other anything, that is still a financial settlement. In order to approve a settlement the court must find that there has been adequate financial disclosure of the parties’ assets, debts and income.
The Rules of Court specify 16 categories of documents that are considered mandatory financial disclosure. They include a financial affidavit that specifies the person’s monthly income, monthly debts, and lists all total debts, and all total assets. The other 15 additional categories document all of the debts and assets and income reported in the affidavit. Unless there is a settlement agreement specifying otherwise, all of the required documents must be exchanged. Even where there is a waiver in the settlement agreement, the exchange of the financial affidavits is still mandatory.
The purpose of this is to insure that neither party can come back later and claim that they were not aware of the true facts when they agreed to take less than they may have received at trial, or to pay more than they may have been required to by the judge. In the event of a trial, the judge will want to know exactly what is available for equitable distribution of assets and debts and to pay alimony or child support.
Once the required documents are exchanged and the affidavits have been filed with the court, the parties are free to agree to any settlement. However, should one or the other lie on his or her affidavit and fail to disclose a substantial asset or source of income, any final judgment either after a trial or based upon and settlement agreement can be set aside based upon fraud on the court.
Once the attorneys have exchanged the required documents, they are able to sit down with their clients and decide the best way to divide up the family’s debts and assets and to determine what if any child support and or alimony should be paid. This is a major reason why most cases avoid the cost of a trial and settle at mediation. The parties and lawyers know what is available and almost always can come to an agreement. When one party or the other is less than honest the cost of finding the answers becomes much higher and can result in an expensive trial.
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