DIVORCE IN A BAD ECONOMY
The decision to proceed with a divorce is a difficult one for a number of reasons. Contemplating divorce in the current poor economy makes that decision even more stressful. However, there are reasonable alternatives in a divorce situation that can help alleviate some of the financial concerns you may have after the divorce is final.
What about the house?
Usually, the largest asset of a marriage is the house, or marital residence. Many people currently owe more on the home than it is presently worth, or are unwilling to sell the home in the depressed market. One possibility is to agree with your spouse that one of you will remain in the home for a fixed period of time, both share in the expenses (although maybe not equally), and then agree to sell the house at a later date, sharing in the net proceeds at some agreed-to percentage. If both spouses are stable in their employment, this is a good option that will likely result in each ultimately receiving more money from the house than if the house were to be sold now. Such an agreement should be in writing, particularly because it involves real property.
If you and your spouse are already behind on your mortgage payments, you should consider contacting the bank or mortgage company directly. Very often they will work with you to defer the outstanding payments to the end of the loan or give you a payment plan that will allow you to catch up the back payments. The banks or mortgage companies would rather help you keep the house than go through a foreclosure.
If you simply cannot afford to keep making the payments on the house and are already in default, you should try to sell the home as a short sale. A short sale is essentially the sale of the home for a price that is less than what is owed. It requires the cooperation of the bank in that the bank must agree to the sales price and be willing to forgive the remaining indebtedness (the difference between what you owe and the sales price) you will have after the sale is complete. You must be very careful that the bank will not report that remaining indebtedness as income to you to the IRS. Sometimes when a debt is forgiven or charged off, it is reported as income on a 1099 form and you have to pay taxes on that amount. Make sure you check that if you are contemplating a short sale of your house. If you are successful in a short sale, your credit score will not impacted as badly as if you had lost your home to foreclosure.
What happens if my income is reduced by my employer or I am laid off?
The income of each of the parties is significant to two primary aspects of a divorce situation. The first is with regard to child support. Child support is an income-driven calculation. If your income drops or is eliminated through no fault of your own, the Court will consider your reduced income in calculating child support. You should be prepared to demonstrate that the drop in your income is as a result of some event or situation out of your control. You and your spouse or former spouse can also agree to voluntarily reduce the child support for a fixed period of time and then reevaluate the income at the end of that time. This is not something a Court would do, but it is certainly an arrangement you can come to on your own. Again, if child support is ordered through the Court, you must agree to the temporary reduction in writing and have a Court order entered. If you are the one paying the child support and you do not make sure the Court enters an order on your temporary reduction, you could find yourself in a contempt proceeding for not being current on our child support.
Alimony, sometimes called spousal support, is also related to the income of the parties. Here again, a Court may reduce or eliminate alimony, on a temporary basis, if you can demonstrate that the decrease in your income is as a result of an event or situation out of your control. Also, here again, you and your spouse or former spouse can agree to voluntarily reduce the alimony for a fixed period of time and reevaluate at the end of that period. Like, child support, you can be held in contempt if you do not have a Court order entered that reduces or eliminates your alimony, so make sure to have that done.
What if I can’t find a job here and need to move or relocate?
Relocation with children is governed by Florida Statute 61.13001. There are very specific procedures that must be followed if you want to move away from your current residence with your children. Some of the factors in the statute that the Court shall consider in making a decision is whether the relocation will generally enhance the child’s quality of life, including from a financial perspective, the current economic and financial situation of the relocating parent, and whether the proposed relocation will improve the economic circumstances of the relocating parent. You must be able to show the Court all of your efforts in trying to find a new job and that you have or will likely have a job in the new location. You must also show the Court that your economic circumstances will improve if you are allowed to relocate with your child. In this situation, it is important that you keep copies of all correspondence with prospective employers either here or in the new location. You should also be ready to show the status of your ongoing bills and that you are either behind or soon to be behind in making those payments. Relocation is not impossible, but there is a strong public policy in Florida that favors keeping parents relatively near each other so that children have the benefit of a relationship with both parents. You must be prepared to show the Court everything that shows why you must move.
What about filing for bankruptcy?
Certainly bankruptcy is a legal option for you if you simply can no longer maintain payments on your bills. We do not do bankruptcy work, but we have a good network of attorneys who do and will be happy to refer to one who can handle that process for you.