Gitlin Law Blog

Bankruptcy Part II

Q: What are the different types of bankruptcy and what is the relevance to divorce cases?
A: Individuals can file for bankruptcy under Chapter 7 or Chapter 13.  Chapter 7 is a total discharge of debts whereas Chapter 13 is a repayment plan allowing the debtor to make payments over the course of time (5 years in many cases) and then have remaining debts discharged.  The type of bankruptcy (7 or 13) affects which debts can be discharged, if and when debts will be discharged, and the contents of the bankruptcy estate.  In relation to divorce, one difference is that property settlements contained in a divorce judgment (Marital Settlement Agreement) are no longer dischargeable under Chapter 7, but are dischargeable if certain conditions are met under Chapter 13.

Q: My ex-spouse just filed for bankruptcy.  Will this affect his obligation to pay child support and maintenance?
A: No.  In fact, child support and maintenance (referred to as domestic support obligations in the bankruptcy statute) receive priority treatment.  Therefore, under Chapter 7 property is first distributed to fulfill the support obligation, and under Chapter 13 the support obligation must be paid in full during the bankruptcy proceedings.  Under the new bankruptcy law, failure to pay current support obligations in full can result in denial of a discharge under Chapter 13.

Q: When my ex-husband filed for bankruptcy, he owed a substantial amount of child support.  How and when can I collect the past-due child support?
A: Support obligations, such as child support, are not dischargeable under Chapter 7 or Chapter 13.  The bankruptcy will not affect your ability to collect past-due support, but the automatic stay may prevent you from attempting to collect pre-bankruptcy-petition past-due child support from property in the bankruptcy estate, and a debtor’s income is part of the bankruptcy estate in a Chapter 13 bankruptcy.

 

Can I Reduce Child Support in a Bad Economy?

In the present recessionary economy people who are obligated to pay child support and/or maintenance may suffer a restriction of income, or even job loss.  Typically what happens is that the person obligated to pay child support and/or maintenance merely stops paying, or pays reduced amounts and takes no court action to reduce the court ordered payments.  The former spouse then files a contempt petition.  Now he wants his child support reduced retroactively.

A CHILD SUPPORT AND/OR MAINTENANCE OBLIGATION CANNOT BE REDUCED RETROACTIVELY, except to the date of filing of a petition for reduction and serving notice of that petition on the other party.  If you are out of work or your income has been reduced substantially you should contact a lawyer immediately.

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Tax Questions Regarding Child Support and Alimony

Q: Can I combine child support and maintenance (alimony) and then deduct the entire amount?
A: Maybe.  This is known as unallocated maintenance and support.  The IRS, however, does not like to be finessed out of receiving taxes, and thus it is very challenging to create an unallocated maintenance and support schedule that the IRS will not challenge.  This is not a do-it-yourself kit, and also may be beyond the capacity of a lawyer who is not divorce-tax savvy.

Q: A divorce is pending and my spouse and I continue to live in the same home.  Can I pay temporary maintenance and deduct it?
A: No.  You may not live in the same household and deduct maintenance payments.

Q: What if I pay, pursuant to a court order or a written separation agreement, my spouse’s rent, the mortgage, tax liability on the residence, or my spouse’s college tuition payments?  May I deduct?
A: Yes, but the mortgage, rent payments etc. cannot be deducted if you own the residence.

Child Support Enforcement

Q: How is a driver’s license suspended to enforce child support?
A: By court order.  The court order can be entered when the obligor is 90 days or more late in support payment, or the court found him to be in arrears in an amount equal to 90 days’ obligation or more.

Q: Can a large arrearage in child support be the basis of convicting a person of a crime for which he will go to jail for a fixed period of time?
A: Yes, if the failure to pay is willful.  If the child support remains unpaid for longer than six months, or the arrearage is greater than $5,000 it is a Class A misdemeanor, punishable by up to one year in jail.

 It is a Class 4 felony to leave Illinois with the intent of evading a support obligation that has remained unpaid for more than six months, or if the arrearage is more than $5,000.  Also, willfully failing to pay support for more than one year, or an arrearage greater than $20,000, is a Class 4 felony.  The sentence for a Class 4 felony is not less than one year or more than three years in prison.  For a felony charge the obligor can be extradited from another state.  This is the significant tool when the obligor does not live in Illinois.

Q: Is the right to order child support through income withholding automatic?
A: Yes.  When an order for child support is entered by a judge, a notice to the employer that the employer is required to wage deduct may be made on a form supplied by the clerk of the court.  This notice is served on the employer.  The employer must then wage deduct for the child support.  If the employee knowingly fails to pay within seven business days, the employer subjects itself to a penalty of $100 per day.

For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases

 

Collecting Child Support

Q:  My ex-husband disappeared over three years ago and owes child support in a substantial amount.  I cannot afford an attorney.  Are any governmental services available to help me?
A:  All states are required by federal law to maintain child support enforcement offices under the federal IV-D program.  These enforcement agencies are required to provide legal services at no charge to the client.  In Illinois, the state agency that provides child support enforcement services is the Illinois Department of Public Aid.  In Illinois, services are available to both AFDC and non-AFDC persons.  Their toll-free number is 1-800-447-4278.

Q:  Isn’t it better to go to a private collection agency rather than the State?
A:  Not always.  It depends on the case.  State agencies have information from federal databases, financial information, IRS and unemployment intercept capabilities that private collection agencies do not normally possess.  Also,  private collection agencies will most likely charge a fee of 1/3 of  the recovery.  On the other hand, state agencies typically are backlogged with a multitude of cases and sometime the result is slower.  Private attorneys also handle child support enforcement and collection cases, usually on the basis of 1/3 of the recovery.

Q:  If I decide to hire a private attorney, can the lawyer request wage withholding?
A:  Yes.  Also a custodial parent may serve the notice of withholding.  The Circuit Clerk of the county where you reside has these forms.

For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases. 

 

Income Tax Consequences of a Divorce

Q: Where else can I go to find answers to my tax questions?
A: The IRS has a website at www.IRS.gov.  Publication 504 provides additional guidance for divorced or separated individuals.

WARNING:  The income tax consequences of a divorce, especially one involving substantial income and/or substantial assets, are legally complex.  You should receive advice from a lawyer who is divorce-income tax knowledgeable, or an accountant.

Attorney Michael Stetler of Gitlin, Busche & Stetler strives to achieve the best possible post-tax results for clients through effective asset selection and tax consequence arbitrage.  He enjoys working with financial documents, understands and can speak effectively with numbers.  His background in taxation and accountancy brings a welcome perspective to Gitlin, Busche & Stetler.

WINNING

 

FACTS WIN, NOT LAWYERS

 

The best lawyer in the community will not win a case with bad facts.  A mediocre lawyer will win a case with good facts.

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Child Support - What is "net income?"

Q: Is “net income” the same as take home pay?
A: No.  The law defines net income.  It is gross income “from all sources” minus certain deductions:  federal and state tax, social security, mandatory retirement contributions, union dues, health insurance premiums, former court ordered child support obligations actually paid and repayment of business debts.

Q: Is income from overtime, second jobs, bonuses, commissions, etc. considered “income”?
A: Yes.  The statute says that income from all sources is considered.  Thus, rental property income, stock dividend income, interest income, etc. are all considered income for the purpose of calculating child support.

Q: I am self employed and have overhead expenses.  Can I deduct from my gross income all of my overhead expenses?
A: No.  The law in this area is not solid, and the present law is not totally sensible.  The child support statute makes “expenditures for repayment of debts that represent reasonable and necessary expenses for the production of income” deductible.  Recent cases held, in effect, that if a child support obligor borrows money to pay business expenses, then there may be a deduction for repayment of the debt, but if it is merely an expense, it is not deductible for child support purposes.  This is not sensible, but it is the law.

Q: In addition to child support can the child support obligor be required to pay other expenses of the children?
A: Yes.  It is customary for the noncustodial parent to be required to pay half of the custodian’s child care expenses during the time the custodian is employed, and for the non-custodial parent to obtain health insurance coverage (pay the premiums) for the children.

For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases. 

DNA Shows You are Not the Father

DNA SHOWS YOU ARE NOT THE FATHER, BUT THE COURTS WILL NOT UNDO THE FINDING OF PATERNITY BECAUSE YOU WAITED TOO LONG AND DID NOT FOLLOW THE PROPER PROCEDURES TO VACATE THE JUDGMENT

The defendant was, in paternity proceedings, found to be the father of the child and ordered to pay child support.  Ten years after the above judgment was entered, the father filed a “Motion to Vacate and Dismiss,” and cited section 2-615 of the Illinois Code of Civil Procedure (735 ILCS 5/2-615).  In the motion to dismiss the father also alleged that DNA tests show that he is not the father of the child.  The appellate court pointed out that the defendant should have applied to vacate the judgment under section 2-1401 of the Illinois Code of Civil Procedure (735 ILCS 5/2-1401).  Under that statute he had to establish the elements of fraudulent misrepresentation and the exercise of due diligence in bringing his petition to vacate.  The defendant did not file a 2-1401 petition.

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For more information visit Gitlin, Busche & Stetler, Woodstock, Illinois lawyers website.

H. Joseph Gitlin covers the practice of family law in Illinois.  Mr. Gitlin is the author of Gitlin on Divorce Reports, which summarize current Illinois opinions.  Click here for Gitlin on Divorce Reports information or contact the office at (815) 338-0021.   Mr. Gitlin's book, Gitlin on Divorce, A Guide to Illinois Matrimonial Law is a necessary tool for lawyers and legal assistants involved in family law and for judges hearing matrimonial cases.

Paternity v. Genetic Testing

ACKNOWLEDGMENT OF PATERNITY v. GENETIC TESTING
KANSAS APPELLATE COURT

A Kansas state agency petitioned for child support in behalf of a nonmarital child against the man who executed a voluntary acknowledgment of paternity, but genetic testing showed that he was not the father.  The Kansas appellate court ruled that the trial court did not err in holding that the alleged father was not liable for child support.

The Illinois appellate court, First District, recently ruled similarly in the case of In re M.M., a Minor v. Robert M. (First Dist., First Div., No. 1-09-3468, filed May 21, 2010).

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