Tips for Divorcing During an Economic Downturn

A recent Bloomberg article highlighted six reasons why a recession is likely in the future, and this may affect how spouses divorce in North Carolina within the next few years. The article states that soft landing predictions always come before recessions, and that rate hikes are continuing to cause serious issues for Americans. Statistics also indicate that the National Bureau of Economic Research will “call” a recession in the closing months of 2023 and that household spending is bound to decrease. Finally, Bloomberg points to factors like labor strikes, student debt, oil prices, yield curves, China’s real estate crisis, and many others when making their argument. While these factors can be alarming, spouses can plan effectively for their divorce during periods of economic downturn. Here are a few tips:

First of all, it might be a good idea to avoid liquidating certain assets during a recession or an economic downturn. This is because selling assets might result in net losses, and holding assets may provide better financial outcomes when recessions fade away. Of course, it might not always be so easy – especially when you need to take your spouse’s needs and wants into account.

Assuming that your ex also recognizes the wisdom of holding assets during a recession, however, there are a number of potential solutions. For example, if spouses hold stocks and a recession is causing a dip in share prices, the stocks can be divided without being sold. This ensures that both spouses can continue to hold these investments in the hopes of an economic recovery down the road, rather than selling at a loss at the time of their divorce. This might be even more effective if the stocks provide dividends.

This is only one example of when holding assets might be better than selling, and the same logic might also apply to other assets, such as real estate. However, you might want to get advice from a professional before making important investment decisions. Each situation is slightly different, and selling might be the best move for some spouses.

One issue is the fact that in a litigated divorce, family courts may order spouses to make certain financial decisions. One of these court orders might include the forced liquidation of assets, resulting in net losses. The reason is simple: Courts see this as the easiest way to deal with property division. From their perspective, selling off assets and dividing the proceeds makes their job easier, regardless of the potential consequences for the spouses.

In order to exert more control over these critical transactions, spouses might wish to avoid litigated divorces altogether. They can do this by choosing collaborative divorce instead. This process involves both spouses working out their differences behind closed doors. With help from their respective attorneys, spouses can choose to divide assets in a way that ensures optimal financial security during recessionary periods.

It is also important to remember that modifications are possible in the future. The most obvious example during a recession is a layoff. During periods of economic downturn, many Americans lose their jobs, often with no warning. While this creates economic hardship, it might also create the opportunity to modify and lower certain spousal support obligations. If a spouse loses a high-paying job during a recession and faces years with no work, they might modify an existing child support or alimony agreement to create a more reasonable, fair outcome.

Finally, spouses might want to consider living together in the same family home even after the divorce filing. This helps both spouses save money on rent and other living costs. The separation period can technically move forward without either spouse moving out, although both parties need to be careful not to resume marital activities or publicly hold themselves out to be a couple.

If you have been searching for a divorce attorney in North Carolina, look no further than Arnold & Smith, PLLC. Over the years, we have helped numerous divorcing spouses in the Tar Heel State – and we know that an economic downturn can cause all kinds of complexities. Fortunately, you are not alone in approaching this difficult situation. We have considerable experience with complex asset division, and we have guided numerous high-net-worth spouses through this process. We know that there are many factors to keep in mind with market fluctuations and unpredictable volatility. Book your consultation today to get started with an effective action plan.