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How an Economic Downturn Impacts Divorce

The economic fallout from the coronavirus pandemic is just beginning to come into focus as millions of Americans face unprecedented financial hardships that could impact divorcing couples. Over the past five months, spouses may have experienced layoffs, furloughs, or pay cuts as COVID-19 business closures leave many occupations in limbo. A dramatic loss of income or a foreclosure on a house may compel ex-spouses to request a modification to his or her child support, spousal support, and marital property.

Can I Modify Spousal Support?

Typically, spousal support is modifiable if you can show a change in circumstances. If you and your spouse signed a settlement agreement or another written, stipulated order that states spousal support is not modifiable, then you can’t make changes. If you and your spouse expressly agree that the court’s jurisdiction to award spousal support ends on a certain date, then you can’t seek modification once that date has passed. Otherwise, if you can show extreme changes in circumstances that affect either a need or an inability to pay, you may ask the court to modify spousal support.

Can I Modify Child Support?

The purpose of child support is to provide a standard of living for your children that is consistent with the standard they enjoyed while you and your spouse were a married couple. California has a strong public policy requiring both parents to support their children according to the parents’ incomes and lifestyle. Child support can be modified but similar to alimony, the spouse seeking a modification must show a significant change in circumstances. Your earning capacity may be considered, instead of current income. The court can look at a spouse’s work history, education, skills, health, and job opportunities. Child support can be automatically withheld from most sources of income including unemployment, workers; compensation, and income from retirement plans.

Facing Foreclosure on Marital Property

A couple facing foreclosure at the same time as divorce must figure out which spouse is responsible for the debt. In California, all property accumulated by either spouse from the date of the marriage to the date of separation is considered community property. During a divorce, there are tax implications and financial liabilities that both spouses must address. Unless one spouse acquired the loan and held the title separately, both spouses are impacted equally if there’s a foreclosure on the marital home.

The divorcing couple will have to decide who gets to keep the house. If neither one wants the property, the couple can attempt a short sale or deed in lieu of foreclosure. If one spouse takes over the house and the mortgage he or she can refinance in their name alone or apply for a loan modification. If both spouses want to keep the property, they may want to consider some options that include renting the house to a third party. One ex-spouse can stay in the house and pay rent to the other or the divorced couple can try “nesting” which allows joint ownership if the couple also rents a small apartment nearby and they alternate living in the house with the children.

Divorce is difficult under normal circumstances but the added stress due to the COVID-19 crisis has added an extra layer of complication for splitting couples. It’s important to prepare yourself mentally and emotionally for the dissolution process that will eventually lead you towards a more fulfilling future.

By Debra Schoenberg