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In Chappaqua, Melissa (her name has been changed at her request) and her husband are in the process of divorce after nearly 10 years of marriage. They are doing it without lawyers. Instead they meet with a mediator, whose fees also strain their finances.
The couple was billed “600 bucks for a three-hour conversation” with the mediator. That was a discounted rate, she said.
Melissa started a job as a personal trainer three months ago after seven years of dependence on her husband”™s income as an architect. Her employment “was predicated on the fact that I was separating,” said Melissa, who before her marriage worked in advertising and marketing.
They continue to live together in a house whose market value has dropped substantially, as much as $100,000 this year. Eventually her husband will buy out her share in the equitable distribution of assets. They will continue to share child-rearing duties in the house he will own.
“It”™s all happened at the worst possible time it could possibly happen financially,” she said. The total of assets to be divided “is going to be a lot less than it was worth a couple years ago and will be a couple years from now. Everything that we have is devalued. It makes absolutely no financial sense” to divorce now.
“That”™s the irony of it. Marriage is this romantic thing that you enter into, but the underpinnings are economic.”
Those underpinnings are shaky for many Westchester couples in this recession. While financial issues have always been a major factor in marital discord, attorneys in matrimonial law here expect to see more couples driven to seek divorce as financial pressures mount in the deepening recession. At the same time, fewer couples have the resources to comfortably move on.
At Gravett & Gravett, a husband-and-wife matrimonial and family law firm in Mount Kisco, Willem and Margaretha Gravett have seen about a 30 percent increase in initial consultations compared with last year. The numbers of potential divorce clients increased noticeably this fall as the stock market plummeted in the financial crisis and white-collar unemployment rose.
“The other effect that we”™ve seen is that cases become much harder to resolve,” Margaretha Gravett said.
Typically, a couple”™s largest assets are the marital residence and 401(k) retirement savings plans. “In northern Westchester, the real estate market is absolutely flat,” she said. With declining home values, “People do not have the equity in the marital residence that they used to.” And retirement accounts have dwindled in the volatile stock market.
“In the past, what it was was a question of dividing the assets,” Willem Gravett said. “Increasingly these days, it becomes about dividing debt.”
“The easy cases are where there”™s a lot of money to go around,” he said. Those cases are decreasing.
“The length of time it takes to sell a house is affecting people”™s decision-making” in the divorce process, said Stephen J. Jones, managing partner at Jones Garneau L.L.P. in Eastchester. Jones said a house in his neighborhood has sat unsold for three years following a couple”™s divorce.
Like the Gravetts, Jones has seen couples affected too by lost or reduced equity in their homes. In the past, divorcing spouses with home equity could sell their house at a profit “and everybody had a nest egg of some sort. Now people have to plan quite differently,” he said.
“Now, they”™re stuck in their house because the real estate market is so flat that they can”™t sell the house,” said Margaretha Gravett. “Even if they can, they don”™t have the money to start over.”
Estranged spouses have become “unwilling roommates,” Willem Gravett said. “They”™re literally trapped in the house together.”
The Gravetts also have seen more clients come in with “crushing credit card debt,” Margaretha Gravett said. “We”™ve seen that with clients where the husband was in the mortgage business or real estate business. It”™s scary, the amount of people we”™ve seen recently where they”™ve maxed out credit cards” and are unable to obtain more credit.
“Sometimes there”™s a huge disconnect between people”™s expectations and the reality of their financial circumstances,” she said. “In those situations, you have to tell them, ”˜You can”™t afford a divorce. You can”™t afford an attorney and you can”™t afford two households.”™”
“Most people are in the biggest, best house they can afford,” Jones said. “They can”™t afford his and her homes. And many can”™t afford to sell the house they”™re in. Even if they decide that they can”™t save their marriage, they have to decide how to live together even longer than they thought. Many people may have to live unhappily married for an extended period of time. Certainly we have lots of examples of people who are living together in their home.”
A Westchester County resident and small business owner, Ruth (her name has been changed at her request) said she was told by her accountant that overall expenses increase by about 40 percent for two households when spouses split. “That alone is a huge adjustment financially. If you add to that enormous legal bills, it”™s downright obscene.”
Ruth said she and her husband recently reached an agreement after “a two-year ordeal.” The drawn-out process included collaborative law, where attorneys and their divorcing clients meet together to negotiate a mutually satisfactory settlement; mediation, which Ruth scathingly described as a costly way for the higher-earning spouse to “whittle away” at an avoided court-ordered settlement, and, in the end, traditional divorce lawyers. “I feel like I was a victim,” she said. “It shouldn”™t be rocket science to separate assets.”
“It ends up we spent I”™d say a quarter of a million dollars to finally reach a settlement. That is typical in these tony suburbs. To us, $250,000 is a huge portion of our assets. For us it was devastating.” The couple tapped their children”™s college education savings to pay for it.
Buying her husband”™s share of their home, Ruth gave her final purchase figure just before “the whole real estate market tanked and figures dropped by about $100,000. But on the same note, his retirement fund took a huge hit” of about the same amount.
“I basically handed all of my money to that man and I think I”™m going to go broke now because I don”™t think I can sell the house in this market,” she said. “I wouldn”™t have agreed to buy him out of the house if I knew what was about to come.”
In her business, Ruth has projected a 40 percent to 50 percent drop in income for 2008-2009 from the previous year. “I don”™t know if my business is going to fold or not,” she said. Yet the income from “my flush year” determined the amount of child support payments she receives from her ex-spouse.
She signed the settlement in November. “The recession just really confused things at the very end,” she said. “Just as we thought we were wrapping up, it created a sort of hysteria over each portion of the settlement that we thought we had already agreed on. It opened up a Pandora ”™s Box that threatened the settlement. When the economy tanked, settlements became completely moot,” right down to the resale value of the family SUV, she said.
“We thought we were in for another year of fighting, but after two years of draining our resources, we basically both instructed our lawyers very firmly, wrap it up. We pretty much stuck to the settlement as it was.”
In Chappaqua, Melissa said that could be the up side of this recession for divorcing couples: “the reality of having to be on each other”™s side in this process because of the economic hardships. We have to do things differently. I can”™t afford to be a b*tch to him and he can”™t afford to be an a**hole to me. That”™s kind of a good coming out of this.”
With nest eggs scarce for divorcing couples, Jones said, “The question if I would like to get divorced now becomes, What do I have to do to become financially qualified to get a divorce? That question has become much more of a consideration now that the easy money is gone.”
“Timing is everything,” Jones said. “A person needs to pick the appropriate time to get divorced. It”™s always been true. Now it”™s become more critical.” It is more critical too for a stay-at-home spouse to find employment before divorcing, he said.
Jones said he is seeing more clients choose to fight a divorce in court rather than accommodate a spouse who wants to split. “When people were very flush,” they more readily agreed to a divorce sought by their spouse, he said. “That”™s a luxury that many people don”™t really have now.”
Child support payments are another concern for divorcing parents in the recession. “What you”™re seeing out there is a lot of uncertainty because people are worried about the source of their future income,” Jones said.
On the flip side, with the values of their businesses and income down, “Some people may view this as an opportunity” to divorce, Willem Gravett said. “”˜Now I”™ll get out cheaply.”™”
Regarding divorce trends in this recession, “I definitely would be interested to see what”™s going to happen because I don”™t think we can use the past as a benchmark here,” Margaretha Gravett said.
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