The Effect of the Economy on Divorce

In today’s world of unemployment and negative home equity, individuals contemplating or currently involved in a divorce or marital dissolution are significantly affected.  Many of these individuals are either postponing their dissolutions in the hope of more favorable economic conditions in the future, while others are unable to sell their assets even once Judgment of Dissolution has been entered.

According to the S&P/Case-Shiller Home Price Index, home values dropped 19.4% in the past year.  As a result, divorcing spouses, already enduring difficult times, must be prepared for the possibility they may be unable to re-finance their home and may be forced to sell their real property in order to buy out the other spouse.  Given the significant decline in home values, many spouses are facing excessive debt compounded by a negative home equity situation.  These spouses may simply decide to stay in the home, and often in the marriage, in an effort to weather the economic storm and await better times.

When dividing the community assets, 401(k) plans and other stock accounts are often used to offset an interest in other assets.  These plans and retirement accounts are now worth significantly less, making it more difficult to separate the assets and equalize the parties.  Many professionals who previously received bonuses based upon a company’s profitability are now receiving smaller bonuses or none at all.  This makes the job of dividing up the community estate much more difficult.

Perhaps the most concerning situation a party can face in the midst of divorce is that of unemployment, either with respect to him or herself or with respect to a spouse.  Despite best efforts, it may be impossible to find alternative employment that compensates the party at the same level as the prior employment.  These spouses may then become locked in a heated Court battle, seeking a Court order imputing a salary to one spouse for spousal or child support purposes.  When the Court imputes a salary, it assigns a salary to a party as if they were earning a specific income.  This is based on the theory that the spouse should be able to earn the imputed amount of income should they chose to work.  However, given the current economic conditions, the question for the Court becomes whether or not the unemployed spouse should be “imputed” for the amount of income they could have made prior to the economic crisis, or if they should be imputed based on the current economic climate.  These questions are handled by the Court on a case by case basis.

Despite the bleak prognosis for the economy and employment situation, there are still ways to achieve a favorable outcome during divorce.  The parties should avail themselves of the mediation programs available through the Court. Most of these programs are available free of charge.  There are also many community mediation programs available.  Spouses who retain attorneys but are still able to communicate should try to reach an agreement with their spouse on as many controversial issues as possible.  Many divorce attorneys will adopt a collaborative approach in working with the opposing party and counsel to reach a mediated settlement.  It is incumbent upon the parties to recognize that the less time and money spent on small or relatively unimportant issues, the more affordable the dissolution will be.  Parties should also be reasonable.  Ultimately, the court will view these parties more favorably if there are fewer unresolved issues that have to be tried.

In some cases, spouses may be able to delay their divorce and stay in the home, perhaps living on separate floors.  While this may not be the first choice, it has worked for couples in the past, and may be beneficial to the children.  When lawyers are involved, parties should be wise and circumspect with respect to the time they spend with their attorneys.  Parties should limit their communications with attorneys to legal issues and seek assistance from a therapist or counselor with respect to emotional problems.

Another option for reducing attorney fees is to seek specific and isolated services from an attorney.  Many attorneys will agree to handle only isolated aspects of dissolution, such as only child visitation and custody.  This leaves the party to represent himself or herself with respect to the remainder of the issues in the case, either on their own or with the assistance of the Court’s self help services.  Much of the paperwork can be completed by the party with the Court’s help.

Particularly in the current economic climate, a party should properly interview his or her attorney before proceeding.  The party should ensure that the attorney is a good fit, and that client and attorney are like-minded with respect to settlement and negotiation.

With careful analysis and planning, and with good legal representation, an individual  may effectively navigate divorce and the related processes despite the current economic conditions.

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