Divorce during a recession

The last few months have proved testing to us all in many different ways.  From a relationship point of view, some couples may find they feel stronger in pulling together through uncertain times.  Others may feel that lockdown and the subsequent restrictions have exposed cracks in their relationship which have been tested and may prompt one or both of you to re-evaluate and contemplate major life changes. Whilst such decisions always require careful consideration, there are added concerns when considering divorce during a pandemic and associated recession.

As with the recession in 2008/2009, divorce during an economic downturn requires different strategies and approaches to a divorce that takes place with the economy is thriving.

Some people will be contemplating separation but are perhaps worried about the financial repercussions of this. There are more financial considerations to take into account at the moment with uncertainty in the job market, amongst other areas, and fear of Covid-19 spikes in the winter months and subsequent health and financial consequences.

A economic downturn and increased unemployment add challenges and stress to every situation. Some may feel that a divorce during a recession would benefit them due to decreased income, which would result in lower maintenance (or higher, depending on which side of the case you are on) and a weaker stock market may mean there is less to split in relation to pensions, investments or property. Couples who are already separation or have concluded their divorce may seek to take advantage of the current recession and pursue a variation of child maintenance or spousal maintenance payments.

You do not need to wait for life to return to what we previously considered ‘normal’ before seeking advice from a family lawyer. As with all aspects of life, we need to move forward and what may be a bad time to separate for one person, may well be a good time to separate for another and the pros and cons of separation will vary depending on individual circumstances. By speaking to a family lawyer, you will be armed with tailored information that may put your mind at rest on certain points and flag up areas that may need a more cautious approach. Seeking initial confidential advice is empowering, which in turn can assist you in making the right decision for you.

It is no secret that the Courts are currently experiencing severe backlogs due to staff shortages and social distancing guidelines, however both the divorce itself and any financial agreement (Consent Order) can now be submitted to the Court online, which is quicker than the traditional paper route at the moment.

In addition, there are many alternative dispute resolution methods that can be considered instead of issuing Court proceedings, such as collaborative law, arbitration or round table meetings, all of which can take place remotely via Skype, Zoom or Teams, thereby reducing the amount of time it may take to reach a satisfactory conclusion for all parties concerned.

Another reason to consider a non-court approach is that it can often cost less than Court proceedings – something that may well be a significant benefit when money may be tight.

A Clean Break Order is an order made by the Court than means that neither party in the divorce will have any financial ties to each other in the future, once all aspects of the order have been implemented. A Clean Break Order is often desired by both the Court and the divorcing couple, as it allows both parties to be financially independent from one another moving forward.

During an economic downturn, some businesses – including family-run businesses – may suffer and their valuations could differ drastically from the value they may have had prior to a recession, as could any resulting dividend payments. Coupled with the possibility of property prices dropping, the result could be that the overall capital value of the marital assets will have decreased, and there may not be enough for a couple to achieve a clean break. That said, economic downturn for some can be an upturn for others, so it is really important to carry out a full enquiry and possibly involve an expert to assess the business valuation.

Where there is uncertainty around assets, a financial settlement may include monthly maintenance payments – in other words it may not be possible to achieve a financial clean break. Whereas in a more thriving climate the settlement may have included a lump sum payment only, which included a capitalised maintenance element.

It is important to be aware that the Court can always vary maintenance and indeed the parties could look to capitalise maintenance once the economy had recovered, thereby achieving a clean break. Because the amount of monthly maintenance can be varied due to changes in circumstances, this can create an ongoing dependency by one party, so it is worth trying to see if a clean break is feasible even when there is an economic downturn.

There is no obligation for the Courts to put a Clean Break Order in place but the Court does have to consider whether it is possible. They will consider the assets and income owned by a couple, either solely or jointly, and providing that there are sufficient funds available to ensure that both parties exit the marriage with enough financial security, and care is taken to ensure that there is a fair division of risk as well as assets, then there is no reason not to approve a Clean Break Order.

Divorce is an emotional process, whatever side of the table you are on, and it is important to prepare yourself mentally. When emotions are running high, it can be difficult for people to separate those emotions from the decisions that need to be made when getting divorced. The more comfortable you are with your emotional well-being, the easier the process may be.

At Hawkins Family Law, we partner with a therapist, Emma Chamberlain as we understand that as well as seeking legal advice, the support of a therapist can also be invaluable during such a difficult time and beyond. Any conversations you have with Emma, or another therapist, will be confidential, so if you feel that such support would be beneficial to you, please do not hesitate to make contact.

If there is any unseen benefit to the current pandemic, it is that many of us have more time, and what we do with that time can make all the difference. If you would like to discuss your situation further, contact us today for advice on divorce during a recession.