Last week I wrote about the difficult parenting time issues facing all of us, but especially divorcing or divorced parents, in the midst of the unprecedented Coronavirus pandemic. As we all continue to live through some level of isolation with our children and attempt to portray some sense of normalcy, each day passes with contrasting feelings of Groundhog’s Day and uncertainty. It is not just our children that we need to worry about, however, as the economy is facing a challenge unlike that seen since 2008.
After a decade of positive job reports, yesterday it was reported that a record 3.28 million Americans (almost five times the previous record set in 1982) applied last week for unemployment insurance as the economy – in many ways – has ground to a halt as our society tries to get through this together. The number of unemployment claims generally tracks the rate of layoffs, which will likely continue as businesses remain shuttered and unable to operate. The eerie feeling of looking out your window or driving in your car and seeing only a handful of people heading to what have been designated by our state government as “essential” jobs leaves us wondering when will all be deemed essential once again. While our law firm has been fortunate in its ability to continue representing our clients in their time of need without issue using truly incredible remote technology, not everyone is so lucky.
Even within the past two weeks I have heard from several past, present and potentially future clients telling me about how suddenly they cannot pay support, suddenly they are not receiving support, and everyone is pointing to the same culprit. When putting this post together, I went back to read posts I wrote back during the 2008/2009 economic downturn to see how relevant those discussions are to what we are going through now and how it impacts upon a payor’s obligation to pay alimony or child support. There are certainly important differences that distinguish that past from this present.
For instance, courthouses are largely closed. With each passing day lawyers are receiving updates from both country trial courts and higher courts as to how matters will be addressed (if they will be addressed at all). While family court judges are doing everything they can to quickly adapt through the use of phone and video conferencing technology, trials are being delayed for the foreseeable future, motions are being adjourned/delayed depending on the court and judge, and even emergency applications – which are still being heard – are often being denied because certain circumstances that we may have always believed constituted an emergency are being downgraded to somewhat less of emergency as courts have determined it is necessary to be more selective in how its truly limited resources will be utilized. Litigants are being encouraged to resolve matters, whether through mediation or otherwise, rather than dive into the true unknown of litigation in the present environment (how this impacts upon certain hearings that are supposed to quickly occur as a matter of justice and due process, such as domestic violence matters, will be addressed in a separate blog post).
When can a payor file to modify support based on an involuntary job loss or income reduction?
So, what does this all mean for people paying and receiving alimony and child support? For those payors looking to immediately address an involuntary job or income loss, New Jersey’s alimony law provides that no motion to modify support for this reason can be filed “until a party has been unemployed, or has not been able to return to or attain employment at prior income levels, or both, for a period of 90 days.” While a family court judge has discretion to make any relief granted retroactive to the date of the employment or income loss, there is no certainty this would occur. Within 90 days the pandemic may be behind us (one can only hope and pray), but your financial difficulties may continue.
For those who want to immediately address the issue but do not want to wait 90 days to file, consider attempting to address and resolve the issue with your former spouse. This is only further emphasized by uncertainty associated with the courthouse closings and when such a motion would be heard.
Resolving your case is almost always a better option than litigation due to the cost and time involved with the latter, and it may be possible with what is happening if you can establish for the payee that your situation is truly as financially dire as you present it to be and that you are doing everything you can to mitigate your losses. This may, in part, depend on what your agreement provides. For instance, does your agreement contain a non-modifiable alimony obligation even in the event of situations such as this?
While it is inevitable in some cases as we are already unfortunately seeing in custody/parenting time and domestic violence matters, this situation should not be used as an opportunity. In other words, in the support context, the pandemic should not be used as a chance to get a support reduction to which you would not otherwise be entitled.
What does the payor have to prove?
As alluded to above, a payor must establish that they are experiencing a substantial and continuing change in financial circumstances meriting a reduction of support. The situation cannot be merely temporary, which this may be. The alimony law provides:
Under circumstances where the changed circumstances arise from the loss of employment, the length of time a party has been involuntarily unemployed or has had an involuntary reduction in income shall not be the only factor considered by the court when an application is filed by a non-self-employed party to reduce alimony because of involuntary loss of employment. The court shall determine the application based upon all of the enumerated factors . . . .
The law then lists out 10 factors for consideration when addressing a “non-self-employed” payor:
(1) The reasons for any loss of income;
(2) Under circumstances where there has been a loss of employment, the obligor's documented efforts to obtain replacement employment or to pursue an alternative occupation;
(3) Under circumstances where there has been a loss of employment, whether the obligor is making a good faith effort to find remunerative employment at any level and in any field;
(4) The income of the obligee; the obligee's circumstances; and the obligee's reasonable efforts to obtain employment in view of those circumstances and existing opportunities;
(5) The impact of the parties' health on their ability to obtain employment;
(6) Any severance compensation or award made in connection with any loss of employment;
(7) Any changes in the respective financial circumstances of the parties that have occurred since the date of the order from which modification is sought;
Thus, there are many components for the family court to consider when deciding if a modification should occur. Notably, filing a motion is only the first step in the process – if you overcome your initial burden of establishing the substantial and continuing change in circumstances then the court is going to order the exchange of further financial information (as both you and the payee former spouse) and schedule a future trial. A trial, especially with what is happening now, could and will very likely not occur until several months after your motion is first heard.
So much of the success or lack of success of that initial motion and ultimate determination will depend on the information/documentation you provide to the court. For instance, if you were involuntarily terminated from your employment because of the pandemic, what have you done to find new work? What has happened to your industry? Is it a non-essential type of business where all comparable companies are going through the same or a similar situation and there will be limited to no jobs available? What proofs do you have of your efforts? Is your argument as to what is or will happen merely speculative or can you prove the actual impact on your financial situation? Have you prepared a job log or diary detailing those efforts and compiling the resumes, want ads, online job requests, job fairs and the like to prove what you have done? Biding your time, choosing to take your career in a different direction, looking for jobs that are not comparable to what you had before and the like may be viewed more skeptically by a judge tasked with addressing your request to reduce support.
Also, how are you paying support and what steps have you taken to adjust your lifestyle? Are you using assets to pay and to what extent has that occurred? Are you still living the same lifestyle you lived before and expecting your former spouse to bear the brunt of what has happened, or have you taken steps to cut back on expenses such as vacations (assuming, of course, that travel has resumed and vacation spots are available to enjoy), domestic help and the like? While there is no requirement that you entirely eliminate your lifestyle as it was before, a court may very well want to consider the sacrifices you have made in your own life. Being able to prove to the family court judge everything you have done with as much supporting information and documentation is critical.
What if I am self-employed?
New Jersey’s alimony law also addresses self-employed individuals experiencing an involuntary reduction of income and provides the moving party’s application for relief
[M]ust include an analysis that sets forth the economic and non-economic benefits the party receives from the business, and which compares these economic and non-economic benefits to those that were in existence at the time of the entry of the [the last order or agreement addressing support].
Many of the same factors for non-self-employed individuals come into play, but the type of information that you may have to provide as a self-employed individual may be more complicated and will be viewed with greater scrutiny by a court aware that such records/income may be subject to a greater degree of manipulation than if you were simply a W-2 wage earner. While not required, and if affordable, consider using a forensic accountant when even preparing the initial application. Under such circumstances, it may be important to show how business has been impacted by the pandemic, were you forced to close as a non-essential business, what has happened to your industry, are you eligible for government financial aid of some kind, have you reduced your staff as needed, and the like. For instance, are you a medical professional that has literally seen a complete elimination of your patient base while this is all happening and for how long did that occur/is it even still occurring? So many details may go into this analysis under a more “normal” set of circumstances, but normal is not what many of us are facing right now.
Finally, should a the family court judge eventually hear your initial motion to modify support, please keep in mind that a temporary remedy can be implemented within the court’s discretion, such as a temporary support suspension or reduction, a direction that support be paid from assets pending further proceedings, requiring a periodic review of the situation, and more in an effort to craft a result that is both fair and equitable before a final decision is rendered as to whether support should be modified following a trial.
Ultimately, we are all going through this crisis together. Whether and how it impacts upon each of us and our financial circumstances will differ in each case. Addressing your particular situation and keeping in the mind the issues addressed in this post will hopefully guide in you deciding what steps to take moving forward.
Contact us to learn more!