Money Management Q&As

September 15, 2006

Divorce negotiations, no-fault auto insurance; buying online

A friendlier way to approach divorce

Q. My wife and I are getting divorced, and a colleague has suggested that we opt for a collaborative process rather than mediation. What's the difference?

A. Mediation uses one impartial third party to help spouses reach an agreement about property, child custody, and the like. But the mediator can't give either spouse legal advice. The collaborative law process addresses that weakness by allowing each spouse to retain an attorney. The spouses and attorneys are required to work together openly and honestly to reach an agreement that both parties can accept. The couple also agrees not to take the case to court before the process is finished.

Protecting yourself when you're the lender

Q. To make sure my home sells quickly and at a good price, I may agree to take back a second mortgage if the prospective buyers need some additional help with financing. Besides checking their credit history, what else could I do to protect myself against default?

A. You may want to insist on a written guarantee that someone else will repay the amount owed if the buyer can't. If you sell the home to a young couple, for instance, you could ask for guarantees from both sets of parents. And you'd be wise to have a financial adviser review the buyers' situation and consult with you about the risk involved, especially if you're taking back a substantial amount.

Since your primary concern is securing a sale at a fair price rather than generating interest income, another option is to sell the note on the secondary market at a discounted price and let someone else worry about collecting the payments. Your real estate attorney can advise you about this, structure the note properly for potential resale, and make sure you're adequately protected in case the buyer has trouble repaying you.

Does your auto policy have this threshold?

Q. I live in New Jersey, a state with no-fault auto insurance, and I've heard the term "verbal threshold" bandied about, but I don't know what it means. Can you explain?

A. In no-fault states, where policyholders involved in an accident file claims with their own insurers regardless of who caused the accident, the law limits the right to sue for pain and suffering or other compensation for severe injuries. The injuries must first reach a certain level of severity specified by state law. In states such as Florida, Michigan, New Jersey, New York, and Pennsylvania, that limit is described in words-a verbal threshold (sometimes called a lawsuit threshold). For instance, in New Jersey, death, dismemberment, and loss of a fetus are among the conditions described in the verbal threshold as valid grounds for a lawsuit. This verbal threshold is usually in lieu of a minimum dollar figure that medical bills must total.

In Kentucky, New Jersey, and Pennsylvania, policyholders can retain the right to sue. But Kentucky and New Jersey laws assume that you agree to the threshold, unless you specify otherwise. (Pennsylvania law takes the opposite approach.) So if you live in one of these states, make sure you know what your rights are.

How to buy online safely

Q. I like the convenience of shopping online, but I worry that a hacker will intercept my credit card number. I already read each company's privacy policy and buy only from vendors who encrypt transmissions. What else I can do to limit my risk?