Crunch Time for Divorce?

Simon Burge, Partner, Blake Lapthorn












With property prices falling, the number of house sales dropping, unemployment
rising and many homeowners with mortgages in negative equity there is certainly
an impact on anyone contemplating a divorce.

Divorce rates have fallen to their lowest levels since 1981 (the Office of National
Statistics). This drop is coinciding with the so called credit crunch as it seems that
more people are worried about their financial situations.

The reduction in the number of divorces could be as a result of fewer people
getting married and more people living together. Problems arise when cohabiting
couples separate and then try to agree the division of property and finances. There
is campaign for law reform to give cohabiting couples more rights – but it is early
days yet.

Another perhaps more cynical view is that divorces are proving less popular
because people are looking at the high profile celebrity divorces with massive
settlements – the fear of which is keeping marriages (albeit) temporarily afloat –
especially in a time of recession.

For the majority of married couples, the single most valuable asset is the family
home. Due to the slow down in the housing market, divorcing couples may be
reluctant or unable to sell forcing the couple to continue living together. As the
value of the family home falls less money is available to re-house and due to
lending restrictions it is also more difficult for one party to buy the other out. One
option is for the couple to agree to rent out the property until the housing market
picks up again. The rental income would be used to pay the monthly mortgage
payments and other necessary outgoings with any surplus income being
distributed equally.

The credit crunch is deemed to be making divorce proceedings take longer and
more complicated. Solicitors have to continually assess the family finances –
especially as share prices and property values fall. Where there is a period of time
between court hearings the marital assets, including shares and property, will
need to be re-valued so that information is kept up-to-date. In any subsequent
agreement or a court order changes in the value of assets do not invalidate the
agreement and so advice is required on how to build asset value changes into any
settlement.

On a final note is the area of insolvency and individual bankruptcy – which is
inevitably increasing. Any financial award made can to some extent be jeopardised
even if bankruptcy occurs after the end of court proceedings.

Although the divorce rate has been falling for the last decade, opinion is that the
number of people seeking a divorce will rise again – look to the 1990's recession,
which led to an increased divorce rate. When the property market starts moving,
house prices begin to rise and people are better off and the chances are that they
may feel a divorce is more affordable. This may be a question of history repeating
itself?

Contact:

For more information contact Simon Burge, a partner in the Family team at Blake Lapthorn,
on 01962 830 102 or email simon.burge@bllaw.co.uk.
All original content copyright (c) John Bolch 2008-9
DO YOUR OWN DIVORCE!
Family Lore
Simon burge