How COVID-19 May Impact the Division of Debts and Assets in an Oregon Divorce

The COVID-19 pandemic has –at least temporarily –changed how American society functions. While things will eventually go back to some version of a “new normal,” the financial and economic impact of the pandemic will have lasting consequences on many Oregonians. While the Oregon unemployment rate hovered around 3.3 percent prior to the crisis, over 20 million Americans have lost their job as a result of the pandemic.Among the many lasting effects of the pandemic is the impact on those who are in the process of going through an Oregon divorce.

When a court presides over an Oregon divorce, the court must allocate the couple’s debts assets between the parties, unless they can agree. Oregon is an equitable distribution state, meaning that courts will distribute assets to each spouse based on what is fair. Notably, this does not mean that the division of assets will be equal. In fact, it rarely is.

In most states, before a judge gets to dividing a couple’s assets, the court must first define what constitutes marital property. Oregon is different, however, in that an individual spouse’s assets that were obtained before the marriage may still be subject to equitable distribution. Oregon divorce law is unique in that there is not a list of factors that a judge must consider when dividing property. Under Oregon law, courts must consider the contribution of a spouse as a homemaker to the acquisition of marital assets; however, other than that, courts have broad discretion when conducting the equitable distribution analysis.

One of the more important considerations in the equitable distribution analysis is the income of each party. As noted above, hundreds of thousands of Oregonians have lost their jobs or otherwise suffered a reduction in their income as a result of the COVID-19 pandemic. This can impact the court’s equitable distribution analysis in several ways. Of course, the court will consider either party’s job loss when determining the division of assets. However, there are other ways in which a reduction in income can affect the court’s analysis. For example, consider a couple’s investments; a loss of income for either or both parties could mean that cash is needed to cover expenses, meaning that assets should be liquidated rather than maintained for investment. This could result in the liquidation of an investment account at historically low levels.

Additionally, the impact of the COVID-19 pandemic on the stock market has drastically reduced the value of most retirement and investment accounts. It is unclear how long the reduction will last. While the fairest approach is to equally divide these difficult-to-value assets, some may seek to take more of the marital retirement or investments in the divorce with the hope that high stock values will return in the future.

Also relevant are the steps that state and federal lawmakers will take to help those who lost their job during the crisis, such as debt-relief options. This may make it easier to retain a mortgaged home or a car with an auto loan even though a default has occurred. The federal government has already initiated minor relief for accruing interest on federal student loans, and additional relief may be forthcoming. For example, there will likely be low,or no interest loans offered by the government or through government programs. Such loans would likely be less costly to service (and thus more attractive to receive in the divorce) than pre-existing loans with higher interest rates.

If you were considering filing for divorce before the COVID-19 pandemic hit, or believe that your spouse is contemplating a divorce, contact one of the dedicated Oregon family law attorneys at Gearing, Rackner & McGrath, LLP.

To schedule a consultation with one of our divorce attorneys in Oregon or SW Washington, call us now at 503.222.9116 or write us.

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