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ECONOMIC RECESSION & DIVORCE |
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Will a divorce be impacted by a recession? |
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Can the recession be a good time in which to bring divorce proceedings? |
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How will a recession affect me if I am the owner of a business and the business is a very substantial asset of the marriage? |
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My (or my spouse's) pension plan is largely funded through shares of stocks and mutual funds. How will the recession impact on the distribution of the pension plan between my spouse and me? |
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How does a recession impact on obligations for child support and maintenance? |
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I heard that there is a decrease in divorce filings during a recession. Why? |
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| Q: |
Will a divorce be impacted by a recession? |
| A: |
Yes, unless you are at such a low rung of the economic ladder that your financial picture cannot become worse during a recession. |
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| Q: |
Can the recession be a good time in which to bring divorce proceedings? |
| A: |
Yes, if a low valuation of assets will be in your favor in a divorce. |
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| Q: |
How will a recession affect me if I am the owner of a business and the business is a very substantial asset of the marriage? |
| A:: |
In a recession the values of most assets go down. The fair market value of a business is determined by the price someone is willing to pay in a bona fide arm's length transaction. In a recession there is a lack of faith in the economy overall. Even if the business is sound, it may be valued substantially lower during a recession than its value during good economic times. It is usual in divorce cases that the owner of the business will be awarded the business (after it has been valued) and the other spouse will be given assets, or cash, to offset the value of the business. Thus, in a recession the payout figure to the other spouse for the business should be less than during good times and the advantage to the business owner is that after the recession the value of the business should rise again. |
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| Q: |
My (or my spouse's) pension plan is largely funded through shares of stocks and mutual funds. How will the recession impact on the distribution of the pension plan between my spouse and me? |
| A: |
Most pension plans are what are called "defined contribution" plans. In defined contribution plans the "defined" is how much the employer will contribute to the plan, but the value of the plan depends on the value of investments (stock mutual funds etc.) which make up the plan. In a recession, the same as in any other sustained bear market, the value of the plan will be smaller. If you are the pension plan owner you should now attempt to buy out your spouse = s interest in the pension plan since you will be buying out your spouse at a lower value than before the market went down. On the other hand, if you are the non-employee spouse, you should seek to have your marital interest in the pension plan assigned to you by a Qualified Domestic Relations Order (an assignment order) in the anticipation/hope that when the nation comes out of the recession the value of the pension plan will rise again. |
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| Q: |
How does a recession impact on obligations for child support and maintenance? |
| A: |
Obviously if the child support and maintenance obligor's income has been reduced, the child support and/or maintenance level will be lower and thus it is advantageous for the obligor to obtain a judgment of divorce when his wages are lower. But when his wages substantially increase this may be a basis for applying for an increase in the support obligation.
From the point of view of the child support and/or maintenance recipient, if the obligor's wages have recently substantially decreased, she should seek income averaging for the past two or three years, but she may not be successful in this because the courts have a preference for dealing with current income, rather than past incomes. |
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| Q: |
I heard that there is a decrease in divorce filings during a recession. Why? |
| A: |
Recessions are a time of uncertainty. Jobs are in jeopardy. The value of investments is dwindling. Salaries and the pay rate are either going down, or are at a standstill. In these circumstances some people believe it is better to hang in there, even if it is not a good marriage, and wait until times improve to seek a divorce. |
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