Divorce and the Economy: The Changing Terrain of Divorce Economics

By John McKindles

June 2009 - There is little dispute that financial pressures significantly contribute to marital strife. Ironically, during periods of economic hardship, the same financial pressures that push spouses apart tend to get in the way of their getting divorced. Put another way, when a husband and wife are struggling to make ends meet with just one household to support, how can they pay for two households and pay to get divorced?

Notwithstanding that apparent fiscal reality, economic recessions in America have historically done little to lower the divorce rate.

History aside, I believe that there is something different in the economic downturn that began in 2008. While a large number of married persons continue to seek legal advice about a possible divorce, there seems to be a growing consensus among Phoenix-area divorce attorneys that would-be divorcees are delaying the actual filing of a divorce petition. And it may well be the dramatic nature of the current economic shift that is responsible.

In a more stable economy, the anticipated terms of a divorce decree can be predicted with greater accuracy. Financial issues such as spousal maintenance, child support, home equity buyouts, business interest buyouts and other asset allocations are more projectable for budgeting purposes.

But in the current economic debacle, we are experiencing the ravages of a perfect financial storm. Real estate negative equity and real estate-related business slumps, coupled with predatory lending practices, have created extremely volatile financial conditions that defy stable budgeting predictions. And, although spousal maintenance and child support in a divorce decree may be modifiable, property distributions and property equalization payments are generally not. A business that was worth $1 million two years ago may be worth half that amount (or less) today. The non-income-producing unhappy spouse would be thrust into a chaotic world of chance if he/she were to file under these economic conditions. Conversely, the business-operating spouse may see this condition as a providential time to file.

So, while it is not disputed that economic woes can create more marital strife, divorce rates appear to be more directly responsive to having a solid practical plan for life after dissolution.