Financing Your Divorce During COVID-19
People often think that bad times, like a pandemic, brings people together. There is certainly no shortage of videos on the internet showing neighbourhoods cheering for essential workers or families celebrating a loved one’s birthday with a car parade. Unfortunately, for many married couples, constant interaction may be bringing them apart.
In post-quarantine China, many cities reported an unprecedented rise in divorce applications. The spike may have been due to administrative backlogs, but many registry offices also claimed the main reason was that married couples were “spending too much time together at home.”1 Similarly, in Ontario, the strain of quarantine has led to a surge of phone calls to family law lawyers about how to start a divorce proceeding.
While divorce is stressful and emotional, it is also very expensive. In Ontario, an uncontested divorce could cost you under $2000. However, if there is a lack of agreement between you and your spouse, it could cost you around $10,000. The more complex the divorce, the more time and money it will cost. Some complex, contested divorces can cost $35,000+ for five days in court.2 With COVID-19, many Canadians have lost their job with 15 million people applying for CERB so far.3 Canadians may want out of their marriage but simply do not have the resources. This begs the question: how do you finance a divorce during COVID-19?
One option is getting a divorce-related loan from lenders like Canadian Divorce Financing (CDF). A large part of the loan would go towards legal fees and expert reports, but a portion can also be used for daily expenses like mortgages, household bills, healthcare and other essential costs.
The financial arrangement is based on a person’s share of the assets owned by their household. On their website, it states “anyone with assets, such as a home, pensions, RRSPs, stocks and bonds, or other investments, can apply to CDF.”4
There are pros and cons to using lenders like CDF. An advantage is that it seems pretty easy to use and you do not have to pay back the loan until the divorce is finalized. Further, the loan gives you more options in hiring a lawyer.
You now have the ability to hire the best defence possible right at the onset of the divorce proceeding. This is especially helpful if there is an inequality of income between spouses. With the extra money, it evens the playing field and allows both parties to be equally aggressive or equally non-aggressive.
The disadvantages stem from paying back the loan. Depending on your divorce settlement, you may need to use a significant portion of it to pay back the funds. Since the money is borrowed before the divorce is finalized and the ultimate divorce settlement amount is unknown, interest rates on the loan tend to be quite high.
You may have to tap into your retirement funds, which could delay your plans for retirement and increase your cost of living. Overall, lenders like CDF are an option to explore, but it should be used with caution.
In light of courts being closed in Ontario except for urgent matters, it is smart to evaluate other alternatives. Mediation is a great option, and it is cheaper and quicker than going to court.
In mediation, the parties work with a neutral third-party (the mediator). Mediators do not make any rulings or decisions, but they can facilitate discussions, which in turn helps the parties come up with a Separation Agreement, figure out support obligations, and/or organize a parenting plan. Mediation is also an alternative that can likely occur via virtual teleconference.
Another alternative is arbitration. This is similar to a court, as a third party (the arbitrator) hears from both sides and makes a binding decision. However, arbitration is often a cheaper option than court, and also allows the parties to decide on the decision-maker.
Lastly, if you do not see yourself getting re-married, simply separating as opposed to divorcing may be sufficient. A separation is when a married or common-law couple decides to live apart. It is possible to physically live in the same house and be considered living “separate and apart”, which may have to be the case amidst covid19.
Divorce is when a court legally ends a marriage due to a breakdown of the marriage, and the parties involved can re-marry. Although you do not need a Separation Agreement to separate, it is a good idea to come up with one and it is significantly cheaper than filing for divorce.
If you are looking for more information or have additional questions, please do not hesitate to contact us. We will be happy to discuss your matter over a free consultation. You can reach our office at 905-366-0202 or contact us through our website here.