| background |
What happens to child support or alimony when a
wage-earner is laid off, furloughed or cut back, or a
commissioned salesperson or small business owner
experiences a loss of income?
Fallout from the economic downturn is spread throughout Maryland.
Job layoffs and furloughs abound. According to the U.S. Bureau of
Labor Statistics, unemployment soared statewide from 4.4% in June
2008 to 7.5% in June 2009. Baltimore City is among the hardest
hit locales in the State, climbing from 6.7% to 11.0%. Dorchester
and Washington counties have also been hit hard. Increases
elsewhere in the State have been substantial, but less severe.
On August 28, 2009, The Daily Record and The Baltimore Sun
carried an Associated Press (AP) article by Megan K. Scott which
reported: "The Maryland Child Support Enforcement Administration
has seen an 18 percent increase over the last year in requests for
child support modifications, said Paula Tolson, spokeswoman for the
state Department of Human Resources." The article continued: "In
Prince George's County, requests have tripled over the past 1½
years. While historically requests have come from custodial parents
who need an increase in support, many are now coming from
noncustodial parents seeking a reduction, according to Joan
Kennedy, director of the county's Office of Child Support
Enforcement."
This reported pattern in Prince George's County may or may not be
replicated elsewhere in the State. In Baltimore City, the number of
re-opened divorce, paternity/child support, custody, and civil
non-support cases actually declined from FY 2008 to FY 2009. In
Baltimore County, re-opened divorce, child support, and paternity
cases increased by only 1.3% in FY 2009, after a decline of 4.5%
the year before. However, in Montgomery County, motions to
modify increased 8.1% in FY 2008 and 10.0% in FY 2009.
In bygone days, an unemployed individual expected to find a job
within the time it takes to get divorced; an individual's salary for the
previous year could be used to forecast this year's salary; and no
one believed that a salesperson paid on commission would never
make another sale. For the foreseeable future, these rules of
thumb must be scrapped. Whether contemplating a new alimony or
child support award, or the modification of an existing one,
calculating "current" and "potential" income is more difficult than it
often used to be.
Under Maryland's child support regime, a parent's support obligation
can only be based on potential income when the parent's
impoverishment is intentional. Thus, potential income would not be
imputed routinely to a worker who has been laid off, furloughed, or
cut back.
In a 1999 case, where the appellant's $115,000 job was abolished,
the Court of Special Appeals (Maryland's intermediate appellate
court) held that the change of circumstances warranted a
modification. However, "the evidence indicated that appellant
declined to accept positions which he felt were not commensurate
with his skills; he was instead making efforts to find the job to
which he felt he was best suited. This certainly was his prerogative,
but not at the expense of his children." Under such circumstances,
the appellate court decided, the trial court was "justified in imputing
to him his probable income for purposes of calculating his child
support obligation during his unemployment." Thus, a parent does
not have the luxury of waiting for the 'right' job to come along.
Consistent with this approach, but with the opposite result, in
1995, the Court of Special Appeals held that "a court [cannot]
restrict a parent's choice of residence in order to insure that he or
she remains in or moves to the highest wage earning area. While a
parent must take into consideration his or her child support
obligation when making job and location choices, such
considerations should not be immobilizing." Thus, where it did not
appear that the party being sued for child support was attempting
to shirk the child support obligation, even though a move from
Baltimore City to Garrett County resulted in a significant wage loss,
a finding of voluntary impoverishment was unwarranted.
More recently, in a 2008 alimony case, a husband's income from his
small business was "highly variable and not always sufficient to meet
the family's needs." After paying alimony of $1,500 and the
mortgage on the house, the parties' only valuable asset, the trial
court would have left the husband with only $667 per month to
meet all other ordinary living expenses -- including income taxes.
The Court of Special Appeals held that there was insufficient factual
support for the trial court's findings as to the husband's present
income and his ability to pay.
In addition, the Court of Special Appeals criticized the trial judge for
the methods used to project the husband's potential income. The
Court emphasized that "a projected income finding . . . is not
necessarily equal to a party's prior highest past earnings" and that
future earning potential must be "based on the evidence and not on
speculation" or "guesswork." The current business and jobs climate
may make findings concerning earning potential vulnerable to this
critique for some time.
Under such circumstances, a reservation of alimony might seem like
a good idea. In a 2002 case, the husband had previously held and
lost a highly-compensated job. During the divorce, he started a
new business on his own. The wife sought and received a
reservation of alimony. The husband appealed.
The Court of Special Appeals noted that in 1987, the Court of
Appeals (Maryland's highest court) had approved a reservation of
alimony based on facts about the future known at the time of
divorce, but indicated that speculation about vague future events
would not be a proper basis for reservation of alimony. Lacking
"evidence tending to establish the likelihood of future success of
appellant's business venture" or "evidence by which to gauge
whether the current circumstances of the business are likely to
change in the foreseeable future," the Court of Special Appeals in
the 2002 case held that "the circuit court was not entitled to reserve
as to alimony based on a wait-and-see approach."
NOTICE: None of the contents of this website constitutes legal
advice. To obtain legal advice, consult with an attorney. This is
especially important in divorce and family law matters, in which
outcomes are often peculiar to the particular facts and
circumstances of the case.
| Recession and Divorce: Loss of Income |
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| Meiselman & Helfant, LLC 29 Wood Lane Rockville, Maryland 20850 301-279-8840 Fax 301-279-9630 E-mail: info@mdfamlaw.com |
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