Divorce As Economic Indicator

By Peter Collins | Published on September 7, 2011 | 0 Comments

As a bankruptcy lawyer in Sarasota, Florida, Peter Collins says that it’s not so much issues of bankruptcy that can help a lawyer measure the state of the local economy. As the principal of The Collins Law Group, Collins says that his work as a divorce lawyer is what tells him if the local economy is improving or not.

Based on bankruptcy filings, says Collins, it’s not possible to say whether Sarasota’s economy is getting better, worse, or is stagnant. One thing is for sure, though: People are still suffering the effects of recession—the effects of a market that has been on the down-trend for years. Even if the economy has been improving, says the Sarasota bankruptcy lawyer, those who suffered from job loss, real estate speculation gone bad, divorce, or insurmountable medical bills are prevented from joining the job force while they deal with their current financial worries. These people are still under a terrible debt burden. Even if the economy improved today, these people would still be carrying their debt into that recovery. For such people, bankruptcy would be the best option to get out of that debt and join the recovering economy.

To better illustrate what’s happening to people, however, a Sarasota bankruptcy lawyer might want to point more to family law topics. Collins can illustrate the local economic situation with an anecdote. A recent client of Collins’s went through a divorce and got stuck with the house, while also having to take care of his kids. If real estate values were up, this would be great, because he could sell the house and the mortgage for a profit. But this man’s house was upside down in equity; it was worth less than its mortgage. To get out of the debt the property was causing this man, he opted to file for bankruptcy. When Collins’s client initially bought the house for $300,000, he and his wife collectively put their paychecks toward paying off the mortgage. It was working. But soon they were scraping by and accumulating credit card debt. Now, after divorce, that double income has been reduced to a single income—the client’s. And yet, the credit card debt and the mortgage remain. To make matters worse, the bad housing market had reduced the home’s value by a half, to $150,000. In such situations, the homeowner can let the home go into foreclosure or take out another mortgage. The last thing this man wanted to do was get another mortgage. But letting the house go into foreclosure wouldn’t erase his debt. That’s why he went to a Sarasota bankruptcy lawyer—to erase all these crushing financial burdens. Bankruptcy made a lot of sense; it would give this man a whole new start.

As Collins shows, bankruptcy and divorce are sometimes intimately connected. But that doesn’t mean that bankruptcy itself is a good indicator of a local economy’s strength. Instead, a detailed look at the effects of a divorce can better reveal the intricacies of a local economy’s situation.

 

*Disclaimer: This article is for informational purposes only. You should not rely on this article as a legal opinion on any specific facts or circumstances, and you should not act upon this information without seeking professional counsel. Publication of this article and your receipt of this article does not create an attorney-client relationship.

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