Divorce Settlements Tough in Recession

Instead of assuming that one spouse will buy the other out of homes and small businesses, Bishop said, couples will need to consider how to split their assets in a way that will maintain their value until the economy improves. That may mean finding a way to hold onto the assets, rather than selling them and splitting the proceeds. “...Not only does it change the dynamics of how the assets are divided, but it changes the dynamic of the negotiations, too,”  Bishop said.            

Couples may have to put their financial needs before their emotional wants, Bishop said. At least until interest rates and home sales improve. “They certainly need to look at what their financial situation is going to be going forward,”  Bishop said,  “and then they’ve got to weigh that as a trade off with their own personal situations and their emotions.”  


CUT BACK ON SPENDING TO KEEP AFLOAT              

Not only will couples be forced to negotiate their settlements more creatively, they may also have to re-evaluate their finances for sheer survival, said Carol Arnott, a certified divorce financial analyst in Delaware. “There is a trickle down effect on the economy,” Arnott said. “I think it has a pretty long arm here. It’s not just impacting decisions made today.”            

Between the slow real estate economy and the market economy’s dropping interest rates, this is an inopportune time to sell or split assets, she said. Homes are not moving as quickly, so the spouse trying to sell a house will be facing a challenge. Couples may be forced to take money out of their retirement accounts just to make ends meet, and that means taking penalties and losing tax deferments, she said. “They may create a hole for themselves. It’s a big hole with a slippery slope,”  Arnott said. “It’s a big black hole and a slippery slope to climb out of.”            

If there is a way to avoid taking money from retirement fund, Arnott said, she would recommend it. She suggest tightening the household budget in any way possible, such as forgoing the big chain cup of coffee, to bringing lunch to work, to thinking twice about driving long distances to save on gas. “That’s the hardest thing because you can’t get blood from a stone,”  Arnott said. “If there is no money, if there are no savings, then they are going to have to tap into other resources.”  


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Michele Bush Kimball has a Ph.D. in mass communication with a specialization in media law. She has spent almost 15 years in the field of journalism, and she teaches at American University in Washington, D.C. She recently won a national research award for her work.