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Support Payments and Financial Crisis
I. The Issue
The United States is in huge economic turmoil. Credit is scarce and being
called. Unemployment rates are higher than they have been since 1994. The
Dow Jones Industrial Average is fluctuating wildly. In October of 2007, the
DJIA was ready to break 14,000. Now it hovers between 8500 and 9000. Certain
crucial sectors of the US economy are faltering, going bankrupt, or are
being bailed out by the US government. Home foreclosure rates are constantly
in the news.
More and more divorced people are finding that because of unemployment or
the poor performances of the businesses they own, they are unable to meet
their child support and maintenance obligations owed to their former
spouses.
Support payments are not modified until there is a Court order modifying
them. Unpaid support obligations are judgments as soon as they come due.
Unpaid child support accrues interest at 12%, and unpaid maintenance accrues
interest at 8%. If a spouse fails to pay support, he or she could be found
in contempt of court and jailed.
Some support payments can be modified. However, there are significant
hurdles.
Obligee spouses are generally suspicious of the obligor spouse’s claim that
he or she is unable to afford support payments. Thus, attempts to work out
support obligations must be supported by full disclosure. The obligee spouse
will want to know that the support obligations are not being “put last,” and
that other creditors are being asked to accept deferred or lower payments.
They want to be sure that the standard of living of the Obligor spouse is
not above that of the Obligee spouse. Obligee spouses also want to be sure
that they do not agree to reduced support obligations only to find that the
obligor spouse has recovered full financial health in two years.
Courts, while somewhat sensitive to economic realities, must be neutral as
between parties. Thus, they often take the position that one person’s
financial crisis should not necessarily be the obligee spouse’s problem.
They also often take the position that, “this too, shall pass,” and economic
storms will be weathered.
Support workout plans must be well thought out, and must not ignore the
obligee spouse’s legitimate concerns. They are also more likely to be
effective with the obligee spouse than the Court, so energy should be put in
getting agreements from the obligee spouse.
II. Options for
Working Out Maintenance Obligations
1.
Contractual Maintenance
i.
Direct Negotiation with Obligee
1.
Abatement of Support
a. Interest Free
b. Agreement Regarding Contempt Citation
c. Resumption at Date Certain or Upon Certain
Conditions
2.
Creation of Joint Financial Plan
3.
Lump Sum Payment at Date Certain
4.
Liquidation Plan in Exchange for Reduced Obligation
5.
Active and Transparent Negotiation with Other Creditors
6.
Filing for Bankruptcy Protection
2.
Non-Contractual Maintenance
i.
Motion to Modify Maintenance
1.
File Immediately
ii.
Direct Negotiation with Obligee
1.
Abatement of Support
a. Interest Free
b. Agreement Regarding Contempt Citation
c. Resumption at Date Certain or Upon Certain
Conditions
2.
Creation of Joint Financial Plan
3.
Lump Sum Payment at Date Certain
4.
Liquidation Plan in Exchange for Reduced Obligation
5.
Active and Transparent Negotiation with Other Creditors
6.
Filing for Bankruptcy Protection
III. Options
for Working Out Child Support Obligations
1. Motion
to Modify Child Support
i. File
Immediately
2. Direct
Negotiation with Obligee
i.
Abatement of Support or Partial Abatement
1. Interest Free
2. Agreement Regarding
Contempt Citation
3. Resumption of Full
Support at Date Certain or Upon Certain Conditions
4. Creation of Joint
Financial Plan
IV. Bankruptcy
1. Does Not
Discharge Support Payments
2. Does
Provide Relief From Other Payments
V. Conclusion
A former spouse is just another obligee/creditor. However, the support
obligations should take priority because failure to meet them could lead to
jail time, and unpaid monthly obligations are immediate judgments.
Negotiating with a former spouse in a business-like way, treating him or her
as another creditor/obligor, is the first step in creating a successful work
out plan. You must step away from the emotions inevitably linked to support
payments. In doing so, you can objectively explore options for dealing with
financial crisis.
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