Have you lost your job or primary income source due to the coronavirus crisis? You’re not alone. More than 20 million jobs have been lost and most of the country remains under stay-at-home orders. With household finances reeling and business shutdowns mounting, many people are concerned about keeping up with child support when unemployed, as well as with alimony payments.
Here are 10 things to keep in mind when it comes to handling alimony and child support when unemployed:
1. Support obligations (both child support and alimony) are based on your income and financial circumstances at the time the agreement or order is set. Those agreements or orders can be hard to modify unless there is a substantial change in your circumstances and ability to pay.
2. Review your agreement or order; it may dictate the circumstances under which you can seek a modification. It may also require alternative dispute resolution, such as mediation, before seeking relief from the Court.
3. Child support payments are always modifiable based on a substantial change in circumstances. Spousal support payments, on the other hand, may be non-modifiable in amount or duration or both.
4. The support recipient (i.e., your ex-spouse) may need the money to cover their own living expenses and those of your children. Like you, the support recipient needs a roof over their head and the ability to put food on the table for your children.
5. Many Court systems are running at limited capacity and have set forth new procedures to deal with the coronavirus crisis; therefore, it may be difficult to get immediate relief from the Court. Nonetheless, relief remains available.
6. Communicate with your ex-spouse about your current situation. They may be willing to work with you to find a solution. If you do not communicate, but rather stop sending the payments without any notice, your ex-spouse will be much less likely to negotiate a resolution of the issue.
7. Support obligations continue to accrue at the amount originally set by agreement or order until modified by subsequent agreement or order. Those support obligations accrue substantial interest if not timely paid.
8. To preserve retroactivity (i.e., the ability to go back in time to seek a modification of the support obligation to when you lost your job or income source), you must file an appropriate petition with the Court and serve notice of that petition on your ex-spouse. Retroactivity is discretionary and is not guaranteed; however, your claim to modify can only go back to the time that you filed and served notice of your petition.
9. If you stop paying but have not modified your agreement or order, your ex-spouse may seek to hold you in contempt of Court for violating the prior agreement or order. In that case, you could become liable not only for the amount past due with interest, but also your ex-spouse’s attorney’s fees and costs for having to enforce compliance with the prior agreement or order. Generally speaking, the only defense to such contempt actions is an actual inability to pay from any source (income, assets, etc.).
10. Courts look beyond your income to determine your ability to pay. If you have $1,000,000 sitting in a bank account, the Court will require you to continue to pay something toward your support obligations. Unemployment benefits are considered income for purposes of support and they count towards your ability to pay. Those benefits may not only be subject to taxation, but also claims of child support and spousal support.
In handling alimony and child support when unemployed, you may be asking yourself, should I seek permission or forgiveness?
That is, should you first ask your ex-spouse to modify the support obligation to reflect your current financial circumstances, or should you just stop the payment and ask for forgiveness from your ex-spouse and the Court later?
The answer depends on your financial affairs and overall circumstances; however, most often it is best to ask for permission first instead of forgiveness later. Do not run the risk of looking non-compliant if you have some ability to pay the obligation.
If you are concerned about alimony or child support when unemployed, and your ability to keep up in these uncertain times, we are here to help. There is value in getting a petition to modify on file (preserves possible retroactivity, shows action to Court that you are taking your obligations seriously, may lessen the severity of possible contempt sanctions if you need to stop paying, creates leverage to negotiate a resolution, etc.).
These are hard times and the Courts understand. We can still get into Court or help negotiate a modification to address your current financial affairs. As a divorce attorney, my goal is to make sure my clients feel comfortable in the amount of child support and alimony they pay or receive, and that the amount is fair and reasonable, both during COVID-19 and moving forward.
J. Matthew Linstroth is a divorce attorney and Partner with the law firm of Katz & Stefani, LLC. Concentrating his practice on divorce litigation and alternative dispute resolution, Linstroth typically represents owners of closely-held businesses and professionals in the financial services, legal, and consulting industries. He has experience in business interest valuation, real estate valuation, asset tracing, and other complex financial issues. To learn more, visit Katz & Stefani.