Equity is not just the difference between what your house is worth and how much you owe. If you are involved in a divorce, then obviously that is a major concern for you. You will have to find a way to equalize the marital balance sheet in the course of dividing the assets and debts between the spouses. Equity is all about being fair. If I may hearken back to my history lessons learned in law school, the English courts were divided into systems, the courts of law, and the courts of chancery. In a court of law (originally controlled by the king), one might find justice, but in a court of chancery (originally controlled by the church), one could find equity or fairness, and often a bit of mercy. What may be just under the law could well be inequitable under chancery. According to a divorce lawyer, in the context of divorcing couples, equity plays a big part in accomplishing settlement. When parties are looking to make a fair settlement, it can diminish the acrimony involved in the separation, and it also sets the stage for future interactions on every other issue.
So what is fair or equitable?
In one sense, doing equity in a divorce is dividing assets and debts fairly. It is not an exact science, and those who wish to divide things down to the penny may be “penny wise” and “pound foolish.” Asset valuations are rarely that exact. But fairness, to corrupt a phrase, is in the eye of the beholder. One party may value a china set more than a baseball card collection, and if they are in the same ballpark as far as value goes, the parties may each take their preference and call it an even swap, or maybe you throw in a teapot to balance it out. Equitably dividing property can be that simple. It helps to be able to take the perspective of the other party and how they may value certain items more than others. When parties both want the same items, then equity becomes a little harder to swallow, and it takes a lot more creative problem solving in order to come up with a division that everyone thinks is fair.