Divorce and the American Dream
For millions of Americans the collapse of the housing market means a stark reappraisal of that so-called American Dream - home ownership. For couples contemplating a divorce, the deflation of the housing bubble often means another difficult consideration when they divide the marital estate.
The housing collapse that began in August 2006 threatens to shave "trillions of dollars of home value" from the aggregate value of the nation's housing stock. For a divorcing couple, the disposition of the family home, which is often laden with emotional considerations, becomes even more difficult because houses, unlike cash or securities, are nonliquid and not easily converted to cash. Moreover, the collapse of the housing market now makes the continuing appreciation of a house, once part of the magnetism of ownership, problematic and even uncertain.
For many years after World War II, home ownership became a metaphor of middle class success. People bought homes secure in the knowledge that they always appreciated in value. Twenty-year mortgages at reasonable rates put ownership within the grasp of an enlarging middle class. Owners took advantage of the interest expense deduction, and then, somewhere past the halfway point of the mortgage, as their incomes increased, paid it off early and held clear title to the place they lived. The house very often became the largest part of the couple's marital estate.
The housing bust changed all that.
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COMMUNITY PROPERTY VERSUS EQUITABLE DISTRIBUTION -- There are two basic ways to handle divorce property division: Community Property: Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin and Puerto Rico are community property states. This means that all marital property is typically defined as community property or separate property. When divorcing, community property is typically divided evenly, and each spouse keeps his or her separate property. Equitable Distribution: All other states follow equitable distribution. This means that a judge decides what is equitable, or fair, rather than simply splitting the property in two. In practice, this may mean that two-thirds of the property goes to the higher earning spouse, with the other spouse getting one-third.
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