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Credit Crunch, Divorce Dilemmas

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Whether you call it a recession or credit crunch the fallout affects more than house prices, jobs and investments. The combined effect of any one or all three of the above can bring a family to the point of separation and raise new issues for those who have already made settlements.

Previous recessions have all brought their share of new circumstances for which solicitors, advisors and the courts have had to find new resolutions. However, as we shall see, appeals against agreements made before the fickle finger of financial fate hit, haven't a history of unqualified success!

Some of the cases are already pointing up the need to be aware of the now more mercurial assets that may be part or all of a settlement. Deals made as recently as a year ago may no longer look as favourable as they did.

In one case a client took as part of his settlement his shares in his employer company - within six months of the deal being reached those shares had declined from hundreds of thousands of pounds to effectively valueless.

Extreme as this example may seem it is not an isolated case.

As well as the high profile cases we hear of or read about - usually involving settlements with many noughts on the end - there are other financial issues affecting separating couples in these difficult times.

Houses that in better times sold quickly and over the expected asking price are now selling for far less, or even worse not selling at all. This is particularly the case here in Sheffield where the asking price used to be far below the expected selling price and as hard as it is to believe in the current climate, some properties saw an increase in value on a regular basis. Thus where often the mother of the children received the house as a major part of her entitlement on divorce or settlement, this may no longer be so attractive.

Maintenance settlements reached which assisted the other spouse in getting used to a one income family can often disappear like mist, when the major earner is made redundant or has less work or a cut in pay or return from investments.

Recently some husbands who had reached what looked like very good deals in very recent times, where the value of the asset turned out to be worth very little within a short time, sought to appeal the orders that had then been made. The courts have stated quickly that these difficult times do not permit an appeal to be brought against an order, for financial issues to be resolved. In the words of one judge in a case from a previous difficult time - the early 1990s - "the ball can bounce the wrong way" sometimes in recession when looking at the value of certain assets and a bad decision by one party is not appealable.

Here are just a few things that you need to consider:
 

  • When splitting up couples need to look at which assets carry more risk than others and try and split those evenly
  • Realistic values for the property or properties are essential.
  • As part of the process before doing any deals financial advice from an independent financial advisor should be sought
  • Last but not least legal advice is always advised

Summing up, the advice to clients must be to try and spread risky or potentially risky assets between the separating couples, so that both take the benefit or detriment of the 'bounce of the ball'. In other words all the eggs aren't in one basket.

However for most people the priority issue will be about the needs of the parent who has the children living with them most of the time, to ensure as much reassuring continuity of care and financial stability as possible.

For further information contact Vanessa Fox by email: vanessafox@keeblehawson.co.uk or direct telephone: 0114 2906232.

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