Dallas Divorce Law Blog by Michelle O'Neil

Divorce has become the most recent victim of plummeting home values, says the New York Times in its article Breaking Up Is Harder To Do After Housing Fall.  Nearly 20% of homes are now worth less than the mortgages owed on them. Where couples once fought over who would keep the house, they now bicker over who will continue to pay for it.  As a result, divorce has become more complicated and often more expensive with lower prospects for a money outcome.  Some divorce lawyers say that some clients are electing to stay together because there are few assets left to help them start over.

In a normal economy, couples typically build equity in their homes, then divide that equity in a divorce, either after selling the house or with one partner buying out the other partner’s share.  But now, more couples own houses that neither spouse can afford to maintain and they cannot sell for what they owe. 

In the Dallas Texas divorce arena, we have been spared the worst of the housing bust, but our house values are, by most accounts, remaining stagnant.  That still creates the problems mentioned in the article in that houses are not the major cash-cow asset they once were.

January is the top month for divorce according to a Scripps Howard News Service report.  Dallas and Collin county divorce lawyer Michelle May O’Neil reports the same trend locally that lawyers report nationally. Potential reasons behind the beginning-of-the-year rise in the number of divorces vary from a desire to maintain the family stability through the holidays to a desire among some couples to start fresh in the new year. While some may consider divorce a chance at a new beginning, the report notes that significant feelings of loss are common among divorcing couples and their children.  Trying to find the right time for the hefty decision is a difficult challenge and there may never be a perfect moment.

Corpus Christi Caller Times, January is Top Month For Divorce

For high net worth clients, now may be an optimum time to get a divorce, especially in the Dallas Texas area.  A down economy and devalued assets benefits the monied-spouse in a divorce.  The decline in house values means that the ratio of equity to debt is lower and the asset division is lower as well.  The same goes with division of retirement or brokerage accounts that hold stock or bonds.   The overall value of those accounts is lower, resulting in a smaller overall division of the estate.  Where once a monied spouse might offer the other spouse a cash buyout, more frequently Dallas divorce attorneys are seeing divisions in-kind, where the spouses share equally in the losses.

On the other hand, now may not be so good to get divorced if you are the non-monied spouse.  Frequently the non-monied spouse will suffer a decrease in overall economic stability as a result of a divorce, even in a good economy.  Now, in this bad economy, keeping the marriage together until the economy recovers might be a good financial plan.

The Wall Street Journal reports that more men are receiving alimony, up to 3.6% over the 5-year period ending in 2006, compared to 2.4% in the previous 5-year period.  Even in the Dallas, Texas area divorces, more men are sacrificing their career opportunities in favor of their wife’s.   Wives make more money than husbands in 33% of all marriages (including those where the husband may  not work.)

Alimony is the money that a higher-earning spouse gives to a lower-earning spouse following the end of the marriage.  Texas has a very limited court-ordered alimony statute, only providing alimony (aka maintenance in Texas) where the parties have been married for 10 or more years, plus the spouses lack property in the divorce to provide for the other spouse’sreasonalbe needs, plus either the spouse lacks the ability to earn wages to meet minimum needs or the spouse or a child have a disability that makes working outside the home difficult.  However, alimony can be provided for by agreement even when the situation lies outsides of the exact parameters of the legal statute.

Men are receiving alimony today for the classic reasons that women traditionally did.  A common argument is that they sacrificed their careers for the sake of their wives or children.

Some spouses find it distasteful to write a check each month to their former spouse.  So, the increasingly common practice is to trade alimony for a fatter slice of the marrital property pie.

A recent article in the American Bar Journal confirms what Dallas divorce lawyers are seeing — the downturn in the economy is making divorces more difficult.  For many couples, their primary assets are the house and the 401K.  House values are declining and so the asset is not worth as much to the divorcing couple.  Also, the physical division of a house as an asset is more difficult because home sales have slowed and mortgage refinances are more difficult to get.  This makes it more difficult for a spouse to receive the division of the equity from that asset.  Some couples are already so heavily mortgaged that there is no equity in the house, so when the value falls, they may have negative equity.

With the sharp declines in the stock market, 401K values are also tumbling.  This leaves less to divide of a normally fairly liquid and divisible asset.

In many cases, a divorce that would have once been a split of an estate with a positive net worth is now an argument over division of debts.  Some couples are even staying together because of the bad economy.  Or… worse… getting a divorce, but continuing to live together.