How You Could Benefit from Divorce During a Recession
An economic recession can cause tension in many areas of
life, but the financial stressors caused by a recession are a common reason for
divorce. The downturn in the economy during a recession often leads to
unemployment, and unemployment naturally gives rise to marital disputes
regarding finances. If the marriage is salvageable, you owe it to yourself and
your family to make it work, but if not, divorcing during a recession may be a
good option.
Whether or not there is a benefit to divorcing during a
recession depends on the unique facts of each case. If you are considering
divorce, there are some specific areas you should pay attention to, regarding
case strategy and deciding when to move forward with your case.
Pros
Child Support and Alimony Payments
Although job loss and limited income is generally a negative
factor, choosing to divorce during an economic recession may be a good thing.
Awards of child support and alimony are largely dependent on a party's income
and the standard of living maintained during the marriage. An individual's income
tends to be lower during an economic downturn, causing child support and
alimony obligations to also be lower.
While there is potential for a child support modification or alimony modification action to be filed, the
party petitioning for a modification must show evidence of a change in circumstance,
and must have the financial resources to hire an attorney and pay court costs.
Without a modification, the reduced alimony and child support obligations will likely
continue for years to come.
Net Worth
While the decreased value of personal investments, retirement
accounts, etc. during a recession are generally not something a person wants to
see in their financial portfolio, this decline in net worth could be a good
thing during a divorce. For example, a marital investment which was once $50k
during a healthy economy, may decline to $40k, or lower, during an economic
recession. To divide these funds at a lower value would result in a loss of
$20k, rather than a loss of $25k.
Difficult financial times also tend to have a negative impact
on the housing market. During a recession, home values decrease because fewer
people have the capital to purchase homes. In the end, the party who retains
the financial accounts or real estate will take a smaller cut, by dividing the
assets at a lower value. The party who retains those assets until the economy
recovers and values increase, will have the greater economic advantage.
Cons
During a recession, fewer jobs are available and the stock
market is unpredictable. As discussed above, the party who retains the real property
will likely divide the home at a lower value, but they must also consider the mortgage
rates to refinance the home in their name, once assets are divided.
Although divorce during a recession appears to be a good thing for the primary breadwinner, the party with a lower income may find themselves with fewer assets after the property division. Since both income and the value of assets typically decrease during a recession, divorcing during a recession will likely result in the party with a limited income receiving smaller awards of alimony, child support, and division of property.
If you are considering a divorce, it is wise to develop a
strategy before you begin the divorce process. Should you have questions
regarding how the economy may impact your divorce or if you wish to discuss
strategy with one of our experienced family law attorneys, contact us for a free
phone consultation.
Written by: Rebekah Ann James