Couples that are contemplating divorce may be hesitant to begin the process while the economy is uncertain. They may worry about overwhelming debt; child and spousal support; keeping their jobs; the health of their stocks and bonds; and especially the housing market.
Much of Illinois has been hard hit by the economic downturn. While Illinois couples who wish to divorce do not have to postpone their plans, they should take the economy into consideration when they craft the terms of their divorces. Some divorce attorneys have adapted to the present circumstances, taking a more comprehensive approach.
The Need for Creative Solutions
The emotional aspects of divorce are challenging, but the economic side can be just as troublesome. The unpredictable economy has changed certain assets into burdens. Houses that were once rising in value have come to be worth less than their mortgages. Stock portfolios that were a source of comfort have dropped farther than anyone could have imagined. Even employment that seemed likely to last until retirement is no longer reliable.
It is possible to go through a divorce without financial devastation, but the fundamentals of divorce – child support, child custody, spousal support and division of assets and debts – must be revisited to accommodate the realities of the economy. An attorney who provides proactive analysis and creative drafting will offer invaluable support.
When couples that have debt divorce, typically the debt is divided between them – sometimes equally, sometimes not. Factors that affect the division of debt include the earning power of each spouse, the assets of each and when the debt was incurred. The division of debt can have a pronounced effect on the tax liabilities and financial health of both parties.
It is not unusual for couples to have a significant amount of credit card debt. Often it is feasible for an attorney to renegotiate that debt with creditors, securing lower interest rates and other favorable terms.
It is important to remember that, once the debt is divided, each partner should attempt to remove his or her name from the debt of the other. This will prevent, for instance, a former spouse from having a lien placed on the home while only the other former spouse is living there.
Financial institutions are well aware of the problems that many homeowners are experiencing with paying their mortgages. With this reality, some institutions are willing to renegotiate the terms of loans in order to better accommodate customers and avoid foreclosure.
Further, a divorcing couple whose home is already in foreclosure may not realize that the foreclosure process does not happen quickly. There may be time to negotiate with the bank or at least stay in the home as the foreclosure process continues.
It is wise to understand how divorce and the resulting financial decisions will affect taxation. This is one reason an attorney’s advice is so valuable.
A house that is sold in a short sale (for less money than the couple owes on the mortgage) could bring up unanticipated tax consequences.
In addition, spousal support, also known as alimony in Oklahoma, is tax deductible for the person who pays it and taxable for the person who receives it. On the other hand, child support is neither tax deductible for the payor nor taxable for the recipient. This may be an important consideration when one of the spouses is the primary wage earner.
Finally, the transfer of a home to just one former spouse upon divorce usually does not incur taxes for that spouse, but consulting an Oklahoma attorney for alimony is best because the law may vary according to the specific situation and location
Extending the Time Frame for Division of Portfolios
A couple that owns stocks, bonds, and other investments traditionally divides those assets at the time of divorce. With the significant changes in the markets, however, most of these assets are not worth what they once were.
Rather than making a final disposition upon divorce, the former spouses may decide to share in the gains and losses associated with the investments for an extended period of time. This requires an analytical approach as to the nature of the assets, the long-term goals of the divorcing parties and their willingness to potentially participate in what could best be described as a “joint venture.”
Divorce Is Not Unattainable
Couples for whom divorce is the right option should not have to remain together merely because of the economy. With smart planning, some creativity and the assistance of diligent attorneys, they can find their way through this complex process.