How do you go from a $3 million net worth and $120k/yr income to bankruptcy in under five years?
Capital Acquisition is Half the Battle
In 1995, my father owned half a rapidly growing landscaping company doing around $3 million in sales a year. They had just bought and built a new office/headquarters, and were growing at around 10% a year.
That year, my parents decided to get divorced.
The Other Half is Capital Retention
My father immediately hired an attorney to represent himself in court. The attorney required a retention fee of $5,000 cash in order to take him on. That week, my mother got an inkling of my dad’s net worth, and decided she needed the best attorney possible.
A relative gave my mom the $50,000 retention fee necessary for the top local attorney.
Lawyers Exist to Litigate
In Florida, husbands can be held liable for their spouse’s attorney fees. In my dad’s case, he was.
Immediately, he lost $55,000 of his net worth, but more importantly, $55,000 of his liquid net worth.
They Profit by Destroying Deals
Early on, my father and mother decided it would be best to do a 50/50 split of assets. However, the attorneys would be rendered useless, so they launched personal attacks to stir the pot and increase fees.
Whenever a deal seemed close, a new personal attack would arise. But on the horizon loomed a bigger problem. Liquidity.
Creating a Need to Liquidate Assets ASAP
Child support payments are one of two possible debts that can land you in jail. (The other is taxes.)
Desperation for liquidity means one thing: you are at the mercy of whoever can provide it, and at whatever discount necessary.
Leaving You in a Horrible Position to Make Deals
My dad’s partner offered to buy his half of the business. What started off as a million dollar buyout ended up being manipulated and talked down to around $250k, because of a desperate need for capital.
You Must Have a Prenuptial Agreement
Even if it’s only to keep your net worth from going to lawyers who will use it against you, to make you hate the person you loved. Decide ahead of time not to waste resources, capital, and worry arguing through the wealth destroying proxy of lawyers.