| background |
| Loss of Income: Impact on Child Support and Alimony |
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.
In bygone days, an unemployed individual expected to find a job
within a few months. An individual's salary for the previous year
could be used to forecast this year's salary. 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 page 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.
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.
In bygone days, an unemployed individual expected to find a job
within a few months. An individual's salary for the previous year
could be used to forecast this year's salary. 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 page 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.
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