In any divorce, the division of assets and debts is likely to be one of the major points of disagreement. However, this is a particular issue during times of recession. As financial circumstances shift dramatically and the value of assets decline, separating spouses may find it increasingly difficult to agree upon the division of assets and any ongoing financial arrangements such as spousal maintenance.
Property Division Under Minnesota Law
Under Minnesota law, a court is to make a "just and equitable" division of marital assets and debts. This does not mean that the division must be equal; rather the court is to consider a variety of factors and determine the proper apportionment.
Even for those who choose to resolve issues related to property division outside of the courtroom, the division is generally guided by these principles, because either spouse could force the issue into a courtroom where a judge would use this standard.
Property division is almost always a contentious issue: While equitable does not inherently mean equal, there is almost always significant and legitimate ground for disagreement. These disagreements are further aggravated when separating spouses cannot agree on the value of a particular asset or the date from which the value should be calculated, as is often the case during a recession.
Determining The Time Of Valuation
Generally for purposes of property division, the day of the initially scheduled prehearing conference or case management conference is the "valuation date." However, separating spouses may agree to a different date or the district court can find that another date is fair and equitable and therefore should be used instead.
When the value of particular assets is subject to great fluctuation, this date can be critical. A house appraised three years ago at $400,000 may now be worth half that, but six months from now, the value may be rebounding. A business that today is valuated at $1 million may be in a very different position a year from now.
However, when dividing property, the issue is not the past or future value of an asset, but its present value as of the valuation date.
Difficulties With Selling Property
In many cases, the only way to divide property and determine its actual value, such as a house, is to sell the property. If neither spouse can afford to buy out the other's share of the property or refinance the mortgage alone, sale may be the only option.
However, many would-be sellers are finding it difficult to sell their homes. The housing market is widely perceived to be a buyer's market, which can make it difficult to attract buyers. Even when potential buyers are interested, they may have difficulty obtaining financing from the bank.
Establishing Spousal Maintenance Levels
Spousal maintenance decisions are also complicated during a recession. Generally, a judge might view a primary wage earner who becomes suddenly unable to secure work with some suspicion. An individual cannot avoid spousal maintenance payments by voluntarily decreasing his or her income.
With the current recession, however, involuntary unemployment or underemployment is a very real problem. An individual may very well shift from a six-figure salary to being unable to find work. Accordingly, maintenance levels must often be determined with the current reality rather than the prior shared standard of living.
Divorce is rarely easy. Most of the time, dividing up two lives that were once intertwined is a difficult process. Even if both spouses are being reasonable, issues related to property division and maintenance are likely to be contentious. When one spouse refuses to listen to reason, these issues become even more difficult to resolve.
With the knowledge and guidance of an experienced family law attorney, however, an individual preparing for divorce can ensure that their interests are protected throughout the process. For more information about divorce in the midst of a recession, speak with a divorce attorney.