Finance: Nobody Wants To Talk About It
Divorce is a common reason for partnership dissolution
By Adam Meredith
One of the hardest things about making a decision for your finances is that you can’t predict divorce. Sadly, close to half of all marriages end up in a dissolution of what began as a happy combining of lives, interests, and investments. Purchasing an aircraft together and putting the investment in a LLC means that both you and your spouse are guarantors on the loan. If your divorce gets nasty, your attorney will probably advise declaring bankruptcy if the buy-out of your partner can’t be resolved. Think long and hard on that one.
If you can figure out a way to buy out your spouse’s interest in the airplane, you’ll be better off in the long run. Bankruptcy has many long-term adverse effects. If you declare bankruptcy, you’ll have to reestablish your credit—which can take time. Lenders will scrutinize your ability to pay back a loan; the loan process will take longer; the lender will want to know the details of why you declared bankruptcy in the first place, and in turn will be more conservative and perhaps levy a higher interest rate; and it could take four to five years to clear your credit. That’s a long time to be out of the air, especially at a time when flying could be the best stress reliever—and cheaper than a therapist.
If you can figure out a way to buy out your spouse’s interest in the airplane, you’ll be better off in the long run.If you can see a way to refinance on your own, go back to the lender and discuss a “material adverse change” to be preapproved. AOPA Finance can help walk you through this scenario. Talk to your tax adviser and/or finance broker on how best to manage this change. The lender may look to strengthen its position in the loan, especially if your spouse was a significant wage earner or had significant income. In that scenario, the lender may want a reduction of the loan’s principle. Or maybe not—the lender may be willing to work with you.
How long will it take you to recover if you simply buy out your spouse? Or sell the aircraft and buy another on your own?
Buying out a partner in an aircraft—whether a divorcing spouse, a retiring partner in a business venture, or a friend who is moving out of state—is something AOPA Finance can speak frankly to you about. It’s helpful to get the best advice you can when disappointments may cloud your judgment. AOPA
Adam Meredith is president of AOPA Aviation Finance Co.
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