In re Marriage of Harris, 07 DJDAR 18936 (December 24, 2007) when Sydney Harris and Louise Croce divorced the dissolution of marriage judgment provided that each waived spousal support, and that Sydney would pay a community debt to Mike and Carol Munaretto and hold Louise harmless from that obligation. Several years after the divorce was completed Sydney filed for bankruptcy and received a discharge of his debts including the divorce debt to the Munarettos. Then in 2004 Louise learned that Sydney discharged the debt when the Munarettos sought to collect the debt from her.
Subsequently, Louise filed a motion to modify spousal support (which she had waived in the dissolution) and to order Sydney to holder her harmless from the Munaretto debt. The court ruled against Louise on the support issue but for her on the debt issue.
As expected, Sydney appealed. On appeal, the Fourth District majority reversed the trial court’s decision stating that the 11 USC 523(a)(15) provides that a dissolution of marriage debt is not dischargeable in bankruptcy unless the debtor spouse lacked the ability to pay, or the benefit to the debtor spouse from the discharge was greater than the detriment it inflicted on the other spouse and since no findings in the lower court were made with regard to this issues it sent the case back to the trial court for further findings to be made. Furthermore, the appeals court stated that under In re Montgomery (Bkcy CD Cal 2004) 310 B.R. 169) that there were several factors that a trial court must consider when determining whether a debtor spousal has the ability to pay, including “(a) the income and expenses of both parties ;(b) whether non-debtor spouse is jointly liable on the debts; (c) number of dependents; (d) the nature of the debts; (e) the reaffirmation of any debts; and, (f) the non-debtor spouse’s ability to pay.”
Therefore, when parties are divorcing before entering into any settlement agreement or stipulated judgment each spouse must considered whether the other spouse will file for bankruptcy and if they are willing to relitigate if that should happen.
The Job Market and Support Issues
In re Marriage of Mosley (2008) 165 Cal.App.4th 1375 the parties (Dawn and Paul Mosely) were married, had children, and then divorced. Because both parties were attorney’s they had a high standard of living and the husband made substantial income as a real estate attorney. Upon dissolution of marriage Paul was order to pay child and spousal support that while it was not at the marital standard of living it was still a substantial sum.
Due to the state of the economy and the downward spiral of the real estate market Paul lost his job at the law firm he was working at. The only other job he could find was as in-house counsel for a homebuilder which paid him substantially less than his law firm position. While the new position had a bonus provision, giving him a bonus of up to 150% of his salary, there was no guarantee that he would get the bonus. As a result of his change in circumstances Paul could not pay child and spousal support and his living expenses.
As a result of his change income Paul filed a motion for change of child and spousal support and for income to be imputed to his former wife, Dawn (who had also been an attorney but took time off to raise their children, two of whom were now grown and the other two were teenagers). Dawn opposed the motion and was successful at the trial level. However, the appeals court found that the trial court erred because it did not take into consideration Paul’s current income. It further scolded Dawn for not reading the Gavron Warning* on the Judgment stating “[s]urely we cannot countenance that argument.” However, the court agreed that Dawn was entitled to some advanced warning that the time was fast approaching when she would need to become self-supporting or “face onerous legal and financial consequences” (quoting Gavron). The court found that even though she had taken a leave from practicing law that at the very least she could get a job as an entry-level attorney or a paralegal. The court advised Dawn that there was a change of circumstances justifying a change in support, that change being Paul’s forced job change and the resulting drop in his income.
Consequently, the court ordered the case remanded to the trial court for the trial court to recalculate child and spousal support based on Paul’s current income.
*In re Marriage of Gavron (1988) 203 Cal.App.3d 705, 250 Cal.Rptr. 148, states that a supported spouse has a duty to make a good-faith effort to become self-supporting.
Article presented by: Margaret D. Wilson, Esq. http://www.mdwesq.com/
