Insight

Divorce in a Downturn

Couples who choose to end their marriage during a recession must confront a host of difficult economic questions in addition to all the financial and emotional demands inherent in any divorce.

Piggy bank broken into different sections
JB

Jennifer Brandt

December 19, 2022 12:00 AM

There is consensus among economists that the U.S. is already in or is heading into a recession. Its depth and duration remain unknown, its ultimate impact unclear. What is certain, though, is that our financial footing can lose its hold in many ways during a downturn: Assets, investments and closely held businesses may lose value, jobs can be lost, qualifying for a mortgage might become more difficult—and if this is all coupled with rising prices, goods and services will become less affordable.

These difficulties cause stress and uncertainty for just about everyone and may affect relationships to the extent that many couples may consider divorcing. For those already doing so, an economic downturn may alter the trajectory of the proceeding—negatively for some, perhaps positively for others.

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Without question, a downturn can stress even the strongest marriages, especially when savings are diminished, income is reduced, and jobs are lost. Financial trouble often leads to lifestyle changes: fewer vacations and dinners out, fewer extras, more belt-tightening. This can spark discord and lead to a relationship breakdown ending in a split.

It’s true, then, that recessions may bring about more instances of divorce. Nonetheless, if finances are tight, some couples under stress—who might otherwise throw in the towel and end the marriage—might conclude instead that divorce will be too expensive. From a financial standpoint, at least, they realize that they wouldn’t be able to maintain a similar lifestyle apart and are better off preserving their assets and income together. Instead of breaking up, they may try harder to find ways to repair the relationship.

Without question, a downturn can stress even the strongest marriages, especially when savings are diminished, income is reduced, and jobs are lost."

For those in the middle of divorce or those who decide things are so untenable that divorce is the only option, an economic downturn can affect many aspects of the process. If there is less money to go around, for example, a divorcing couple may have no choice but to live together during pendency to conserve resources. A divorcing couple who continue to live together, especially when money is tight, can be a bad thing not only for the two of them but also for any children who have to live in an unhappy household. At its worst, this can lead to domestic violence.

With costs rising and less money to spend, legal services are harder to afford. This might lead some couples to put their divorce on hold for a time or look for ways to amicably resolve disputes through alternative means, such as mediation, to avoid costly litigation.

A recession can be especially difficult for those going through a “gray” divorce—that is, later in life, when the kids are in college or grown. Because such couples are nearing retirement age, it can be that much harder for them to recover financially. They’re not only watching their retirement accounts shrink in the downturn—the fact that these accounts will be divided makes such attrition all the more painful. Divorcing couples who need to get back to work after a hiatus at home raising children will find fewer job opportunities in a teetering economy. A recession might also tighten the housing market, making it harder for a divorcing party to refinance an existing mortgage to be able to stay put, or to qualify for a mortgage to buy a new home.

Conversely (and counterintuitively), some divorcing parties might find economic benefit in splitting amid a battered economy. Closely held businesses, for example, may be valued lower than they would be in good times. A business owner therefore might pay less to retain a business that will likely recover as the broader economy does. When wages are depressed and bonuses smaller, support and alimony payments might also decrease. Falling home prices can make it easier for one spouse to remain in the marital home and buy out the departing spouse. (There’s additional potential upside once the housing market recovers as well.)

It’s not far-fetched to envision how a recession could affect custody arrangements, which have evolved alongside the change in work-life balance during the pandemic. Many parents have acclimated to working from home and traveling less for the job, obviating the need for third-party caregivers and leaving both parents more available for childcare, as well as freer to divide custodial time.

All the same, though, a downturn and tightening of the job market might mean people don’t have as much freedom from nine to five. They might be required to work more or return to the office, leaving them less time for childcare, all of which can lead to custody arrangements being reevaluated and ultimately changed, to the potential detriment of parents and children alike.

A recession is a burden for everyone, and it might cause some married couples’ relationship to shatter. Some will divorce; others might work that much harder to stay together and weather the financial storm. Depending on the situation, a recession can be the worst possible time to get divorced, or it might bring certain economic or other advantages. Whatever the particulars, what’s critical is that all parties are aware of how economic turbulence might affect their decision to divorce—and, more importantly, how their divorce itself will be affected by financial disruption.

Jennifer Brandt is the chair of Cozen O'Connor’s Family Law Group and the American Bar Association Family Law Section secretary for the 2022-2023 year. She has significant experience representing parties in divorce, custody and support/alimony matters throughout Pennsylvania and New Jersey. Jennifer can be reached at jbrandt@cozen.com and 215.665.2113.

Headline Image: iStock/malerapaso

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