by Lori Caldwell-Carr,
Orlando Divorce Attorney

A dramatically declining economy can produce bigger challenges for families facing divorce.   As a family law attorney, I have seen huge increases in couples involved in bankruptcy and foreclosure.

If you “Google” divorce statistics in 2009 you will find conflicting information.  Some of the statistical data will say that divorce is down during the recession because couples financially can’t afford to live separately so they are trying harder to make their marriages work.  Others say that divorce is up, because financial stresses can many times be the final straw for an already troubled relationship.

Regardless of whether divorce statistics are up or down, the reality is the recession does have a very real effect on divorce.  Couples need sound legal advice when considering divorce during a recession.

Assets – What Assets?

Home Sweet Home

It wasn’t long ago that clients came to me with solid equity in their marital home.  For many families it was their major asset.  Today as a result of the decreasing value of homes especially in Florida, high first mortgages, second mortgages and home equity lines of credit, many couples owe substantially more than the fair market value of their homes.

In the past, many of my clients would sell the marital home, pay off all debt and split the equity leaving enough for each to go out and put some type of down payment on a smaller home.  Today couples are struggling to hang on to the one home they are “upside down” in.  They literally separate within the same home hoping they can hang in there until the market rebounds.

Even if the couple decides to place the home on the market, it is (on the average) taking three times longer to sell a home in 2010 than it did three years ago.  You need to be aware of possible deficiencies and extra ongoing expenses with the home which will further deplete assets.

“Couples need to be more creative in dividing assets in an equitable way to preserve  retirement options for both parties”

Many retirement accounts including, 401(k) and 403(b) accounts, IRAs and pensions, have been de-valued with the downturn in the market.  Accounts that had been set aside for retirement are worth substantially less than they were a short time ago.  Families that were on target for both parties to retire at 65 are sometimes left with enough for only one to retire.

In the past, one party would use the equity in a retirement plan as an off-set against the equity in the marital home.  Unfortunately, because of the economic recession this is happening less and less.  Couples need to be more creative in dividing assets in an equitable way to preserve retirement options for both parties.

Credit Card Debt

Further complicating matters can be substantial credit card debt that has been accumulated during the marriage.

No Jobs

There is no or negative equity in the marital home, the 401(k) is half the value of what it was just a few years ago, the stock portfolio has been substantially depleted and there is major credit card debt.  On top of that, one of the partners just got laid off as a top marketing executive for a large real estate developer.  So the large income is gone.  The lesser income earning spouse can request that the court impute income to the laid off executive.  However, if the executive can show that they have applied for several jobs in the last six months and there is no place for them but as a cashier at McDonald’s, you may be stuck with minimum wage.

So How Can A Lawyer Help?

One of the first things I do for every client is a simplified equitable distribution worksheet.   On one side of a sheet of paper you list all of the assets and their fair market value (only way to determine the true value for real estate is with a qualified appraiser) and on the other side of the sheet you list all of the debts and the total debt.  You add up each column, subtract the debts from the assets and hope you get a positive figure.  In many of my cases we are fighting over who will pay off the debt instead of how to divide the assets.  I have referred more clients in the past six months to bankruptcy attorneys prior to a final judgment being entered so they can fully understand their options in reference to their debts.  (If there are substantial unsecured joint debts, the parties should both file for bankruptcy claiming the joint debts prior to the entry of final judgment or only the filing spouse will be released from the debt, leaving the entire burden on the other spouse.)

Additional Resources

Other resources on our website include other Articles, Family Law Frequently Asked Questions and Family Law Legal Definitions. For specific questions or concerns or to set an appointment to discuss your Family Law matter in detail, Contact Us.