0230: A Restraining Order to Protect Your Money in Divorce (Automatic Temporary Restraining Order)

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Almost half the people I talk to on a given day or week have yet to file for divorce. And they are in the planning phases and are trying to figure out their options. Now, I'm never an advocate for divorce, but there's one situation in which I encourage people to file sooner over later. And the reason is because, when you file for divorce, you generally have additional protections when it comes to financial decisions that are made. And specifically, most divorce filings include something that's called a temporary restraining order or automatic temporary restraining order, depending upon your state. And what that means is that neither spouse is allowed to make big financial decisions once the divorce is filed.

And the reason that's important is oftentimes I hear people saying, "Well, my spouse is thinking about doing this. Should I go along with it? Or how can I stop this from happening? Or how do I protect myself if my spouse does that?" And oftentimes the only answer is, if this is something you're really worried about, you need to file for divorce now to protect yourself and to prevent your spouse from making this particular financial decision that could be very harmful to your future particularly when divorce is on the horizon. And this temporary restraining order or automatic temporary restraining order, as I said, prevents your spouse and you as well, but your spouse from making big financial moves.

And what are those? Those could be something like selling property, transferring property, borrowing, like taking on a big debt, changing your insurance policies, withdrawing, that's a word I have a lot of trouble with, withdrawing large sums of money from bank accounts, destroying or hiding assets, paying down big debts, taking on big debts, making a big purchase, things like that. And the restraining order, which you get when you file, is there to protect you and to keep your spouse from doing those things. Now, it gets a little complicated because there are two things that are really important notes to think about. The first is that you can still do stuff that's in the normal course of business.

Had a really challenging case lately where the spouses were business owners and they were filing for divorce, and they were trying to figure out how to still continue... They had a very, very successful business, but they buy and sell, I'm just going to use the word property very generally, regularly. I mean, that was basically what the nature of their business is. They buy and sell lots of properties. And so, the question was, under this temporary restraining order, how do we keep running the business the way we need to run the business, given that basically, all they do is large transactions and how to make that work efficiently.

But other times I hear people saying, "My spouse is about to withdraw a bunch of money or transfer a bunch of money to here or there." And that's when that restraining order comes into play. But the point of all of that is just to say, the restraining order’s first important note is that you're still allowed to pay your groceries, pay your bills, pay your mortgage, do the normal things that you do to run a normal life. It's not meant to stop spending completely because that would be unrealistic. The second thing that you should know is that it's not perfect. And what I say by it's not perfect is, just because you have this restraining order in effect doesn't mean that your bank knows, doesn't mean your credit card company knows, doesn't mean that all of the institutions know what's going on.

So even though there may be this restraining order in effect, if your bank doesn't know, your spouse could theoretically make some big transfers to different places. And, yeah, that'll come up later in the discussion, but it is not something that automatically goes in place to every institution that you work with. And so, it's something that you need to be aware of and you need to communicate these things with all of your various service providers to make sure that they follow through with what's on the instructions. Now, of course, there will be or there can be consequences down the line if your spouse violates this restraining order, this temporary restraining order. However, the issue is that you have to deal with that later. Meaning, it could take a month or two or several months to get back what has been taken even after that restraining order.

And I'll give you a scenario that comes up almost every week or two that someone calls me about, is they say, "Hey, my spouse is from a foreign country." It doesn't really matter which country, but another country. "How do I protect myself?" And the big issue is, that spouse could at any moment really, they could take the... Before the divorce is filed, they could just say, "Well, I'm just going to wire all of my money to this country and then I'm going to move there and what are you going to do?" Well, that's a real possibility. And while you're married, and there's no divorce action that's been filed, that's a theoretical possibility and a real one.

But in those types of cases, I'll always say, look, your best hope is to file, or oftentimes your best hope is to file and then also send this order directly to your bank the same day to prevent a big wire transfer from going out that you don't sign off on, and the money disappearing and your spouse disappearing and you're out of luck. So it's something to think about. Another scenario that comes up all the time is, you know that divorce may be on the horizon in a year or two. It may not be immediate, but as I said, about half the people I talk to, some are close to filing, but some are several years off. And a common question is, "Hey, we're thinking about refinancing the house." And I'll say, "Where's the money going to go? Are you going to take money out? Where's that money going to go? Is this going to be a smart decision?"

And I'll walk through a bunch of questions for the individual person, but I'll say, "Hey, if you're taking out $100,000 or $300,000 as part of the refinance, is that going to be a smart move for you? And is that really what you want, particularly if you get divorced a year from now or two years from now, is that going to hurt you financially? And how do we stop your spouse from doing this?" Now, another thing to note is, as I talk about these temporary restraining orders is, if you file for a divorce because you want one of these in place, it doesn't mean that you have to rush the divorce process most of the time. You can file just to have this in place, and then work very, very slowly on the other stuff because you just don't write from a timing perspective.

But in terms of protecting your funds and protecting your money, if you're in a disadvantageous position and you don't want something to happen, or if your spouse is about to, I don't know, go back to school and take on a big student loan. You don't want that to be marital property, or that could be something else, or just take out a big debt. There are lots of different scenarios in which this could come into play. And so, I want to make sure you're aware of the importance of a temporary restraining order. It's almost in every divorce situation, but you need to think about it, know your state's rules, do your research, and it may be a very useful tool for you as you figure out the appropriate timing for filing for divorce. And it may be a good way, a useful way, to protect yourself going forward.