Advice for sister

[fireweb13]

My sister wants to leave her husband. Here is the background, they have a 2 1/2 year old daughter. My sister makes about $42000 a year. Her Husband ownes a landscaping company that is SEVERLY in Debt. about 5ish years ago he bought a new nissan pickup, enclosed trailer, big riding lawnmower and all the things needed and everything was brand new. I know all this is not paid off yet but have no idea how bad that is. They got a sizable income tax cheque back this year and he decided to expand his business without consulting my sister at all. He got himself about (estimated) $230 000 in new equipment. Granted he works very hard and does a very good job as well but they were in a very bad financial situation before these purchases. So he financed all these items before getting the income tax Cheque, and they were audited but everything was ok, just took longer. When he had the cheque first thing he did was buy an apple desktop computer, IPAD, apple IPhone 4s and so on and so forth. Now they have people asking them for money.
My sister still has student loans to pay, she has a $500 a month car lease payment, and all credit cards are maxed (not sure how much).
She wants out, individually either of them are not bad people but just very toxic together (in my opinion). My sister informed me she is planning on leaving their rental apartment with their daughter but that she wants to have a shared parenting schedule where they split the week up. I am concerned that she is going to leave the apartment with their daughter without serious conversation, she claims she got legal advice for this. I am just worried that by her taking drastic and sudden action he could try and force an emergency motion to have their daughter brought back and her to continue to pay her half of the rent and so forth. I doubt my sister would try for a false domestic abuse claim, and since she wants him to be a big part of their daughters life I worry that this will tarnish anything they could have, as he cannot afford the place on his own. I also worry about the very large debt that his company has as it is not incorporated.
He is terrible with money (his best friend works for Nike and has a wife who is a surgeon and he is trying to keep up with them).
My sister is very depressed and her mood swings are to the point that I do get scared that she may hurt their daughter, as she is unmedicated and whatnot but I am not going to get into details. I am just at a loss here about what to say as she sees me as a person to turn to since I have been going through this for 4 + years. I was not married though, and we had very little debt which I worked huge amounts of overtime in 4 months and paid it all off. I am not to familiar with what to do in her situation. Thank you

[Rioe]

Is she leaving him for other reasons just beyond the money issues, or is that the crux of it? Have they tried consulting with a financial expert and getting a budget and sticking to it? There's lots of things they can do, as a team, to get out of that financial pit, including psychological counselling to help him get over his "keeping up with the Jones' syndrome." But she needs to be honest with him and express her fears about their financial situation and let him know she's considering leaving him because she can't live that way. He may be living in a cloud and not realize the impact his debt is having on his marriage, and it's not fair to not give him a chance to salvage it before she jumps to separation.

But if there are other reasons to separate, and she's firm in her decision, she needs to set the ball in motion. There's a "list" around here of steps to take, and her key one would be financial documentation. She needs, before she even tells him of her intentions, to make copies of every single financial document she can get her hands on, bank statements, credit statements, loan statements, purchase receipts, etc. Personal, and business-related. That way she has an idea what will be on his financial statement, and can argue any misrepresentation he may try to pull.

[Tayken]

1. No fault divorce in Canada.
2. The debt incurred no matter who was responsible is split equally between the parties.
3. If the other parent has less income (despite ownership of a business) and children are split equally your sister may be paying child support.
4. The business and its debts are joint assets probably. Divorcing someone to get out of debt never works. If there is a formula that can demonstrate this on a consistent basis let me know.
5. Financial issues is the #1 issue and reason for divorce. Both parties are in the financial situation due to their conduct. You can't project blame on one party of the marriage. Both people contributed. It may be lack of telling the other partner that the money was going out the door and fixing the problem. It may be that your sister has tried. The reality is... Divorce is not about projecting blame. It is about moving on with your life and cleaning up the mess you left behind (financially).

Good Luck!
Tayken

[fireweb13]

They both have alot of problems outside the marriage. They have gone to their church minister for help but at the end of the day. I know that before meeting her husband she was never in debt, and worked 2 jobs to stay afloat at times. I can't say what her husband was like before I met him lol. My sister is very emotional, and always seems to be living on the edge of a meltdown and is always having irrational outbursts. Their daughter is very very smart, very very cute and VERY hyper lol, she can be awake for a whole day and still dance for an hour if you put music on. Having a hyper daughter I think has caused issues as my sister is very tired. They have alot of issues though and it is time to seperate.

I know that any personal debt would be split, like credit cards, personal cars and all that stuff, but what about the business? If he wants to keep the business going then why would she pay half the debt? I have never dealt with financials so I am not sure how to direct her. I told her that she will be expected to pay half of the debt load. Also he is off all winter so if she leaves with the child, he would have a good arguement to bring her back since he is home with her all winter instead of daycare

[billm]

She shouldn't 'leave with the child'.

The parents and the child all live in the same home. Changing this requires the agreement of both parents. Just not right to leave without discussing it and coming to an arrangement.

As for the business, if he keeps it, he does not keep all the debt. The value of the business (including it assets) would be his, and he would have to pay her for half that value, but she also has to pay him for half the debt.

At the end, they should both have the same net worth (even if it is negative).

[fireweb13]

I have told her that they should get a babysitter and she should bring in a 3rd party and discuss with him the fact that they are breaking up and they need to get a plan together, and that just leaving when he is at work is horrible. She says she has told him she is leaving but he probably figures she is crying wolf as she has probably done it many times in the past.
I wonder how you would figure out the value of a company? Especially if it has just taken on a huge new debt load this summer. Also if the debts are part of the company and she has to pay half of it, but he keeps all the equipment would she not be allowed half the profit from the company in the future? I really have no idea how it works with owning a business.

[billm]

He pays her for the value of the equipment, but also he has to pay her for half of the value of company itself (which may be 0, or not). There's the value of the debt in the company, and the value of the assets - those are fairly easy to determine. Then there is the value of the company above and beyond that, which again may be 0, but may have some value. She would get half of that.

I would bet that there is no value in the company above its assets such as its name, client list, etc - so really if the company owes 100K, and owns 50K of assets for example. Its worth is -50K, she would pay him 25K and he would keep the debt and the assets of the company (for example). Its just straight math.

[fireweb13]

Something tells me she is going to have to get a second job.... with him just taking on at least $230000 in debt, and I am guessing about $100 000 other company debts. Plus all their other debt and they have pretty well no equity. How would claiming bankruptcy work with this if she cannot afford to pay this debt

[billm]

There are discussion here about bankruptcy.

I know it does not seem fair that she gets saddled with all this debt, though you are not protesting it, but marriage is an economic partnership. Even if he did not consult her, and she left it up to him, she is responsible for the debt.

If on the other hand he was a business genius, and had borrowed money etc, and built a successful business which had a positive net value, she would get half of that value. People often agree is splitting assets they didn't create directly, but want to offload debts on the one who 'caused' them.

He may not be good at business, but he was doing the best he could and she married him - she is stuck with her poor 'investment'. Who knows, maybe he is on the right track and taking on the debt was a good idea. After separating though, she does not want to be in business with him! So have to settle everything now.

Yes have a 3rd (or fourth!) party around - don't gang up on him. And have the child somewhere else. It is crazy to not communicate during this time - things have to be dealt with and she needs to 'put on the big girl pants' as someone here often says.

[AnarX]

I would encourage your sister to get help for her emotional problems first.

Unless there are credible claims of abuse, a person -- i.e., your sister -- who is comfortable controlling the family by leaving with the daughter is not a person to be trusted.

[fireweb13]

Absolutly AnarX, We have been pushing her to get help for a couple years now as she needs to speak to her doctor about things, and get refered to the proper people as she is way to stressed out to much of the time.

What would happen to the company though if she paid half the debt off? The company would still exist and would still be making money to pay the debts off on its own if he keeps the business.

[billm]

Yes, the company could continue.

But is the possible future value of the company the husband? Then she can't hang on to his work efforts - except in the form of SS. If she said she wants the company or half of it, he could just walk away and start again. The net family property and debts still have to be split and this includes the company.

It stems from what I said before, if there is no value in the company other than its assets, meaning no one would pay money for it other than to get the assets, then he should buy her out (mean she gives him money because the company is worth less than 0!).

So I would think, not knowing anything about the company, that if she feels that she is in debt from what he did with the company AND she feels it was good idea and will eventually make money, then I think her best bet is SS adjusted yearly. This assume was I said above was true, that the value of the company is him, and not some value of what was set up (aside from the assets such as equipment etc).

I am talking in practical terms. In business one may argue that he invested her money, and now wants to hit reset and start again, leaving her with debt (and him as well, but he will make money because the business venture is thought to be valid). And because of that he should take on more or all of the debt if he wants the company.

In reality he may well declare bankruptcy or never make any money. Also, being tied to him financially via a company etc, will stress your sister out more, and does not seem like a good idea.

Best to just cut ties - perhaps he would be willing to take on more debt

[fireweb13]

Ok, so lets say he wants to keep his equipment which is really owned by the bank but they both own it all 50/50 right. So if she ownes half the debt that means she ownes half the equipment, and she could try and get him to buy her half of the debt to keep the equipment. If not she could force the sale of the stuff to pay for the debt that is in the business, or they could discuss getting rid of the business and jointly claiming bankruptcy and then divorcing maybe.
Its hard being about 2 hours away, as right now I would tell her to see her doctor and look after their daughter so she could get herself straightened out first before making this move. She may also be afraid that he is going to get further into debt so it is better to cut it off now before its even worse.

[BeenThereTwice]

Use the enter key to create paragraphs to make your posts easier to read. I gave up part way through.

Suggest your sister wait until apartment lease comes up for renewal, and make sure the landlord gets notice exactly on the right day that she will not be responsible for renewal.

Between now and then, suggest your sister cancel anything she is paying for that is discretionary in any way, and start hoarding her cash, as she gets ready to leave. She'll need first and last ready to go.

She should prepare to let him keep all the equipment, AND the debt that comes with it. Doesn't sound like they have much else, and he'll need it all to earn an income.. which I assume your sister would WANT him to do, so that she can collect CS.

CS will be hard to determine in this case, as income is highly variable, and large debts present. She will need to be prepared to accept a LOW CS, it least initially.

She likely won't get SS.

She likely would win sole custody in court, unless there is something wrong with her. My guess is that he would not complain about that, so long as they both negotiate a reasonable access and CS.

[blinkandimgone]

So you gave up reading part way through and are replying to the post anyways despite not knowing what it says? Why doesn't that surprise me...