How the Economy has Changed Divorce

Until 2007 when the housing market starting taking a nose dive, the issue of who would be awarded the marital home was determined by which party had the financial means to buy the other party's interest in the property. So if at the time of trial it is determined that marital home was valued at $100,000 in excess of the amount owed, then the party with the ability to pay $50,000 to the other party would be awarded the house.

Even if neither party had $50,000 in cash to pay the other party, one side probably could refinance the house to take out the money to pay the other party if they could then afford the resulting increase in monthly mortgage payments. Sometimes both parties were in a position to do so. In addition, the "buy out" of the equity in the marital home is balanced against the division of other property. For instance, if one party received $100,000 in equity in the marital home, and the other received $100,000 in other assets, then neither party would owe the other. Debts must also be taken into account.

But in today's economy, when it comes to deciding who gets the marital home, the issue more often is who is stuck with the house? Because now we have half or more of all properties "upside down" in value. Now we have a house being awarded to one party or the other and there is not only no equity, the house is valued at less than what is owed on it. And no, the person who gets the house does not get to take it for negative value. They get it for nothing, but they are stuck buying a house for more than what it is worth!

When neither party wants the house we sell it, right? But it is difficult to sell a house that is worth less than is owed. This means a short sale. That means both parties suffer a hit to their credit. Once, the parties in a divorce sold their house and each received enough money from the sale to go out and buy a new house. Now parties let their house go into foreclosure and both have difficulty even renting a home because their credit has suffered. 

Divorces today are characterized by a house worth less than what is owed, one spouse who has lost their job or experienced a cut in pay, increased debt as a result of a loss of income, and almost nothing but personal property to divide when all is said and done. Some couples just can't afford to get divorced.