If you are in the throes of separating or getting divorced, you will usually, at some point early in the process, hear the term “financial disclosure”. But do all couples disclose their financial situation, and if not, are there consequences for not doing so? In this article, we answer these questions and more.
What is financial disclosure?
Firstly, it is important to give a quick overview about financial disclosure and what it entails. Financial disclosure is the process where the separating or divorcing couple reveals their finances to one another. This can be done on either a voluntary basis or via an application to the court.
All financial assets and liabilities should be disclosed, such as all sources of income, budgets, and future expenditure, needs and requirements, and both matrimonial and non-matrimonial assets. Supporting documentation will also need to be supplied, for example, bank statements, wage slips, business accounts and pension details.
Can I refuse financial disclosure?
There is a duty on both parties throughout the divorce process to provide full and frank disclosure. Refusal may lead to significant delays and rising costs, and inaccurate reporting or non-disclosure could cause an existing agreement having to be discarded, and sometimes a criminal conviction.
Why is financial disclosure important?
Financial disclosure is essential if a divorce is to be considered fair. If disclosure does not take place, neither party will ever be certain that their financial settlement is reasonable. There is also the risk of future legal challenges based on “non-disclosure”, or financial claims, many years later. With full and frank disclosure, you will achieve complete closure knowing the divorce settlement is based on fact.
What can happen if you fail to disclose your finances on divorce?
It is possible to get divorced without revealing your financial situation to your ex, but you will be unable to obtain a financial consent order. This is a legally binding document, so if you have not provided complete financial disclosure when signing a “Statement of Truth” and it is later shown in court that you did not reveal your assets, there is a significant legal risk. You may have to look at the whole disclosure process again, and in severe cases, could even be fined or imprisoned by the court.
Penalties for non-disclosure of assets in divorce include:
- Costs order where one party is made to pay their partner’s costs
- Adverse inference – this is where an individual’s reluctance to be transparent about their finances could lead to the court deciding they have more assets to draw upon than is being disclosed
- Previous non-disclosure of assets could result in an existing order being overturned
- A penal notice can be added to an order ordering disclosure, which, if ignored, an application can be made for the refusing party to be imprisoned for a period of time.
What are the risks of not getting a financial order in divorce?
Without providing financial disclosure, you will not be able to get a financial order, whether this is by consent or court application. Even if you and your ex don’t have any assets to divide, it is still sensible to get a financial order because without a legally binding order, either party may in the future be able to make a financial claim against the other. Sometimes many years later when the other’s situation has changed for the better. In circumstances where there are limited or no assets, a “Clean Break Order” may be appropriate as it provides both parties with peace of mind that their ex is prevented from making any financial claims, whatever the circumstances.
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