By Jim Hoover, Partner & Certified Family Law Specialist, Hoover Krepelka, LLP
There’s already enough financial uncertainty in a divorce: but what happens when either you or your ex-spouse loses a job?
Well, you blame the other spouse, of course! That unhelpful answer put aside, many clients have asked what happens to spousal support, alimony, maintenance, child support, and/or attorney’s fees during the recent increase in layoffs and less than positive economic forecasts (let’s not use the “R” word, yet).
Let’s address spousal support. Of course, job and hence income loss is a pivotal factor in spousal support. The short, oversimplified (and not always correct) answer is that if either spouse loses her/his job, the lowering financial tide will lower both of their “net spendable income” boats, and spousal support will go down if it is the obligor’s job loss, or up if it is the obligee’s job loss, until further agreement/court order.
But that’s the short easy answer that leaves you with more questions; and, if you ask an attorney what time it is, he or she will tell you how a clock works.
So let’s dive deeper.
Spousal support is based upon a variety of factors, but the most important is income. Income comes from a variety of sources, including but not limited to: (i) earned (employment) income (base/bonus/commission/equity); (ii) investment income (stock/brokerage account appreciation on sale); (iii) other taxable income (rental income, retirement withdrawals); and (iv) imputed income. One can “drill down” on imputed income to include the nonexclusive following: (a) earning capacity based upon ability (education/vocational background), opportunity (job market) and impediments to work; (b) reasonable rate of return on investable assets (one with high net worth but no earned income; (c) income/ability to pay based upon receipt of money in bank accounts from other sources; and (d) phantom income from third party sources.
There’s a lot there. So what do we do if we represent someone who lost her/his job? Well, first, we apologize as this is very stressful! But really:
- We notify the other spouse immediately of the job loss, and with said notice include any and all documents/information that are relevant, including but not limited to most recent paystubs, communications with the company regarding termination, HR file, severance agreement, COBRA instructions if applicable, et cetera. We want to disarm the other spouse and dispel any notion that this was done voluntarily, or in an attempt to evade or increase support obligations.
- If there is a support order in effect, we request that the other spouse stipulate to a modification of support, typically effective upon the ending of severance/PTO payout. If the other spouse does not agree, we must file a request for order as soon as possible in order to reserve retroactivity (Family Code Section 3653).
- We counsel our clients that it makes sense to look for employment. That includes what proactive measures the client is taking: updating a resume, updating online professional profiles, subscribing to job websites, account for applications/interviews, use of resources from prior employer or other resources out there such as recruiters/headhunters, et cetera. And, we provide this information voluntarily to the other spouse.
- We don’t agree to any imputation of income to our client (will address below) or a seek work order, just yet. Give it time. We simply wish for some breathing room for a few months. It used to be an old maxim that it takes one month for every $10K a person earns, to find a job. That metric is probably $20K now, for cost-of-living adjustment/inflation. So, that means it very well may be that it will take months if not a year, for a spouse to find a commensurate job, if that exists.
If we represent the obligor/payor, and she/he takes the above advice, it is likely that support will decrease materially pending agreement/further order of the Court.
If we represent the obligee/payee, we inform her/him of the above and take a more proactive approach to ensure the obligor/payor is taking all steps to become employed. If we represent the oblige/payee who lost her/his job, we take much of the same approach above, and support will increase.
I hope that is helpful. Now, let’s move on to the legal side. Hopefully, no court involvement is necessary, but if it is, here it goes:
- We would file a request for order to modify/terminate support: lots of forms, lots of declarations. The other spouse will oppose it as there is inherent distrust; that is why it is important to have quality, formidable, cooperative counsel on both sides to educate, advocate and act in the clients’ best interests. And, over-disclose!
- The other spouse very likely would request: (i) the client’s cooperation with a vocational evaluation with an expert per Family Code Section 4331 which, per Marriage of Bardzick (2008), is required for reliable evidence as to one’s earning capacity (described below), typically at shared or the other spouse’s cost; (ii) the client comply with a seek work order/employment efforts order; (iii) even with these two requests, still request imputation of income to the client’s earning capacity (discussed below).
- The whole point of 2 is that the other spouse will argue that the client has the ability (educational, vocational and work history and skill set) and opportunity (job market) and no impediments to be earning at her/his prior salary. One doesn’t have to actually earn $$$ ot be forced into work if one does not wish to work, but one should, and we should put that in one’s column for purposes of support – that’s their argument. Per Marriage of Bardzick (2008) saying so does it make it so, and the obligee will need reliable evidence such as a vocational evaluator, and several if not many months of review of your efforts, under a seek work order or otherwise, to prove one’s earning capacity.
The earning capacity argument can be “a long road to a small house”, meaning it will take time and money and bad feelings to ultimately arrive at a fair resolution. It’s quite a deep dive that we do not have time for here. So, that is why we take the practical approach and not just the legal approach above.
The above is not meant to be legal advice, and every case is different. Feel free to reach out to us at Hoover Krepelka, LLP, if you have any questions!