Renegotiating Divorce Agreements

The historic economic downturn has caused many people’s long-term commitments to be reevaluated because the circumstances that existed when they undertook those obligations have changed to the point that they cannot honor them. People understand backing away from church pledges and other charitable donations, but one area that receives less attention but is no less open to renegotiation is a divorce agreement.

Many of my clients hesitate to agree to terms in their mediated divorce agreement because they do not want to commit themselves to things that may prove unrealistic later. There may be no money to cash one person out of the house, and yet the person staying in the house cannot commit to a sale date because he or she doesn’t know whether the market will even support a sale at that price in the near future.

Also, monthly support payments can become an issue. The payer’s most common argument is, “I know I’m making this much now, but it’s heading downward.” Or, “I got a bonus last year, but I’m either not getting one this year, or it’ll be much smaller.” Or, “I don’t know what my commissions will be because the industry has fallen flat.”

The recipient’s most common reply is, “I don’t want to lock myself into a lower support structure now just because the economy is bad. We were doing way better financially just a couple years ago, and as soon as the recession is over, he’ll be back to making what he was.”

The way around all that uncertainty is to put a clause in your divorce agreement that spells out how renegotiation will take place. In the case of speculative income, you can index it to a base salary plus a certain percentage of income over and above that amount, up to a certain higher amount but not infinitely higher.