Divorcing Economically and Collaboratively in a Recession

A recent issue of the British magazine, The Week, reports that divorce lawyers have been facing some difficulties. The editors point to a survey by the American Academy of Matrimonial Lawyers. The survey’s finding is that the recession is making it too expensive for many couples to split up. “Couples are ‘toughing it out,’ the group said, until the recovery.”

Admittedly, if couples go the traditional route of each retaining a lawyer to represent each spouse’s interests in court, the costs can be high. It is estimated that the average litigated divorce costs each party $18,000, while highly contentious divorces and custody battles can cost $40,000 or more per side.

Adding insult to injury, there’s only so much a judge is authorized to do in dividing property and awarding spousal maintenance. For example, a judge will not order, over a party’s objection, that the husband and wife continue to own the family home as partners after the divorce is final. A judge’s duty is to divide the community property. If there is not enough other property to compensate one party for his or her fair share of the house equity, the house must be sold to provide the cash for both parties. And divorcing couples are loathe to sell the family home in a down real estate market.

Fortunately, there is a pathway to avoiding economic ruin without “toughing out” a marriage that is over for all intents and purposes. In the early stages of mediation, a seasoned mediator can take couples through all the issues that need to be decided in order to come to agreement on a parenting plan, division of property, and spousal maintenance. The mediator writes up the agreement at the end of the process. 

The husband and wife own the content of the mediation while the mediator is in charge of the process. Typically, three to five two-hour sessions will be needed to cover all the bases and reach agreement on all issues, including a parenting plan, child support, college education, retirement accounts, real estate, stock transfers, taxes, air miles, and the family pet.

Creative alternatives to avoid the sale of the family home and liquidation of stocks in a down market are part and parcel to divorce mediation in times of recession. To avoid this scenario, spouses may opt for joint ownership of real estate for a period of time after the divorce with stipulations as to who pays the mortgage in the meantime, who lives in the house, and when the house will be sold or refinanced. Similarly, liquidation of securities can be avoided by splitting stocks in-kind.

So, for those couples who want to stay out of court and who want to be in charge of the content of their separation agreement, there are viable options to toughing it out together under the same roof until economic conditions improve.