Sunday, February 1, 2009

Divorce and the credit crunch

Along the lines of misery loves company, a reminder that the credit crunch is nationwide and even world-wide. What can we learn from all this?

DivorceSolicitor has Trapped by the credit crunch?:

"What happens when couples can't afford to divorce? Maybe we will go the way of Southern Ireland - when it was difficult to get a divorce they divided the house in two - I predict that lots more people will live separate lives in the same house and there will be an increase in planning applications to convert houses into flats!!!"

Not so sure how well that will work for my clients who rent apartments.

International Family Law published Credit crunch raises divorce rate for America's superwealthy brings little sympathy to my heart as it shows how the other half divorces.
One New York divorce lawyer said one client was worried that his wife would leave him if she found out that his net worth had fallen from $20 million (£10 million) to $8 million after he suffered huge losses on property and other investments. To keep his wife he was trying to mask his declining fortune by borrowing to pay for her clothes and holidays.

Breaking Up Is Harder to Do After Housing Fall from California Divorce and Family Law Blog mentions some nasty statistics:

With nearly one in six homes worth less than the mortgage owed on it, according to Moody’s, divorce lawyers and financial advisers around the country say the logistics of divorce have been turned around. “We used to fight about who gets to keep the house,” said Gary Nickelson, president of the American Academy of Matrimonial Lawyers. “Now we fight about who gets stuck with the dead cow.”

As a result, divorce has become more complicated and often more expensive, with lower prospects for money on the other side. Some divorce lawyers say that business has slowed or that clients are deciding to stay together because there are no assets left to help them start over.

And then points out a similar solution to DivorceSolicitor:

For other couples it does not have to end. Lisa Decker, a certified divorce financial analyst in Atlanta, said she was seeing couples who were determined to stay together even after divorce because they could not sell their home, a phenomenon rarely seen before outside Manhattan.

“We’re finding the husband on one floor, the wife on the other,” Ms. Decker said. “Now one is coming home with a new boyfriend or girlfriend, and it’s creating a layer to relationships that we haven’t seen before. Unfortunately, we’re seeing ‘The War of the Roses’ for real, not just in a Hollywood movie.

California Divorce and Family Law Blog has another post on real estate and divorce, Custody of homes becoming main debate in divorce cases.

Neither Marybeth nor her husband could afford the house on their own, so she's living there.

They put it on the market, but so far there are no takers.

Divorce attorney Vikkie Ziegler says the current climate is forcing many couples to get creative.

"I'll allow one party to remain in the home, not pull the equity out, try to come up with a financial package, and then perhaps when a child turns 18 or graduates high school, they'll sell it because the market perhaps would be better," said Vikkie.


Here is the Contact 13 bottom line if you are thinking about a divorce and fear your house will be a big issue, experts say it's more important than ever to plan things out.

Talk to a mortgage broker, a financial advisor and a realtor.

Before selling take into account whether you or your ex can afford the mortgage on your own and find out if you would qualify to refinance and reduce the monthly payments.

Right now, I am looking at a case where the parties have rental properties and all have gone into foreclosure and the opposing party has filed bankruptcy. With different facts on my side, I would have recommended bankruptcy to my client or taking over the rental business. The debts exceed the real estate's value.

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