Filing for bankruptcy in order to avoid alimony is not always the best idea. An obligation to pay spousal support, also considered a domestic support obligation, is almost always not dischargeable. The general rule is that a debt for spousal support, or alimony, cannot be cancelled or forgiven.
What is Alimony? Alimony is spousal support after a divorce ends a marriage. The support provided through alimony, from one former spouse to the other, is usually temporary. Alimony is often arranged when a marriage involved one spouse making majority or all of the income, while the other spouse took care of the home. The “stay at home” spouse is often the recipient of alimony in a divorce. Changing Alimony During Bankruptcy Getting alimony payments adjusted or discharged through bankruptcy is often a daunting undertaking. The supporting spouse should list the supported spouse as a creditor. While it is difficult for alimony to be discharged, there are still a few ways alimony can be changed. If the alimony and the supported spouse are not listed on the bankruptcy petition, alimony discharge becomes nearly impossible. Debt that is not listed in a bankruptcy petition cannot be discharged in bankruptcy court. Although alimony cannot usually be discharged in bankruptcy, there are two exceptions to this rule. The first instance that alimony can be discharged in bankruptcy is when the payment of debt is falsely named as being alimony. If a divorce decree states that an obligation to a spouse is alimony, but the obligation is not actually alimony, then the obligation has the potential to be discharged in bankruptcy. The second instance that alimony could be discharged is if the obligation of debt has been turned over to a third party. For example, two people get divorced and one is obligated to pay the other a certain amount per month. The person in charge of making the payments stop, therefore, the individual relying on those payments must get them from a third party. That third party now owns the right to collect the alimony from the original spouse in charge of the payments. If the spouse in charge of paying alimony files bankruptcy, the alimony obligation can be discharged to the extent it has been legally transferred to the third party. Bankruptcy can have a huge impact on one’s ability to pay alimony. A major factor the court utilizes in order to determine spousal support payments is the supporting spouse’s ability to pay – considering their earning capacity, actual income, assets, and standard of living.
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Commonality of Modifying Alimony
After a court grants alimony (either temporary or permanent), it may later be modified by the court or terminated completely depending on the circumstance. There must be a substantial change in circumstances in order for court to modify an existing agreement. Courts have wide discretion in how they define situations that constitute a substantial change in circumstances to warrant a change in alimony. It is not common for a court to modify an existing alimony award. North Carolina submits to the partnership theory of marriage, where both partners have an equal obligation to provide financial support to each other during marriage. This theory extends to post-separation spousal support. Spousal Support: Payor and Recipient During the process of modifying alimony agreements, an individual is either the payor or the recipient of spousal support. These roles are determined objectively depending on which partner was financially superior in the marriage. The payor is typically the partner who will be giving money to the recipient or dependent partner. The amount of spousal support depends specific factors, such factors include: the duration of the marriage, the role of each spouse, and the age of the partners. Modification of Spousal Support Either party has the ability to initiate modification of an award. The party who moves for a modification of alimony has the responsibility of showing a substantial change in circumstances that warrant change in spousal support. Typically, the party will either move for either upward modification or downward modification.
Decreased marriage rates, rising divorce rates, and a growing incidence of unmarried cohabitation have combined to create and increasingly common situation: unmarried cohabitation between a dependent spouse and a third party. The question is, what effect should this cohabitation have on a supporting spouse’s continued duty to pay alimony to the dependent spouse? This article explores the legislation that is used in North Carolina and conditions that modify and terminate alimony payments.
Modified Legislation in North Carolina For the past thirty years, North Carolina’s alimony has been “fault based”. A dependent spouse was entitled to receive alimony only if the spouse was able to provide substantial evidence to show that the supporting spouse had committed one of several “matrimonial offenses”. As of October 1, 1995, a dependent spouse’s obligation to prove “marital fault” as a condition of alimony has been eliminated. The rationale for financially punishing the spouse that caused the destruction of the marriage has lost its credibility. Thus the change was made toward a balancing of economics and less of a focus on fault finding. Remarriage Each state proposes a different legislative solution to termination or modification of alimony payments. In North Carolina, remarriage of a dependent spouse will terminate court-ordered alimony. This statue applies to divorces both prior to and after October, 1995. However, it is important to acknowledge that remarriage only terminates future alimony payments, it does not excuse any overdue payments from before the remarriage. In the event that support payments are subject to a separation agreement between parties that is not stated in a court order, then the terms of the agreement apply. An agreement of this nature, may or may not include a clause that terminates support upon remarriage. If the agreements is stated in a court order, then it is modifiable by the court and the support obligation may be terminated on remarriage. Cohabitation According to the October statue, when a dependent spouse engages in cohabitation, post-separation support and alimony will usually be terminated. More specifically, alimony terminates when cohabitation has an economic impact on the dependent spouse. The legal definition of cohabitation is, the “continuous and habitual living together with evidence of the voluntary mutual assumption of those marital rights, duties, and obligations which are usually manifested by married people”. A North Carolina court of appeals found that cohabitation existed when a couple had been in a monogamous relationship for ten months and slept in the same dwelling for up to five times per week. In a rare case the court found that cohabitation existed when the parties maintained separate dwellings (did not spend nights together) but kept personal belongings at their significant other’s home. The more rights, duties, and obligations associated with cohabitation, the more likely it is to have an economic impact on the dependent former spouse. It is also more likely that it will appear that the dependent former spouse is acting in bad faith by avoiding the formalities of marriage primarily to continue receiving alimony. There are several factors to consider when determining if a couple is cohabitating or not. Some of these factors include:
Much like there are factors to support cohabitation, there are factors that are not enough to support a finding of cohabitation. Such factors include:
Situational Factors of Cohabitation There are situational factors to consider when determining whether or not a couple is engaging in cohabitation. The first of these is monogamy. Sexual intercourse between the dependent spouse and the new partner is not required for there to be a cohabitation that will terminate alimony. Secondly, it is important to examine the relationship between the dependent spouse and the person that they are living with. For example, although living with roommates and family members can reduce the dependent party’s expenses it is not considered cohabitation. However, living with a roommate or a family member can have an impact on the amount of the support. Finally, is unlike marriage cohabitation does not have a definite start date. Lately, courts have dated the cohabitation to the date that one party brings a motion to terminate support. Remarriage of a dependent spouse will terminate court-ordered alimony under North Carolina law. This applies to divorces both before and after October, 1995. However, remarriage only terminates future alimony payments. It does not excuse any overdue payments from before the remarriage. If support payments are subject to a separation agreement between the parties that has not been made part of a court order, then the terms of the agreement apply. Such an agreement may or may not include a clause that terminates support upon remarriage. If the agreement is incorporated into a court order, then it is modifiable by the court and the support obligation may be terminated on remarriage.
In North Carolina, for actions filed after October, 1995, post-separation support and alimony will also usually terminate when a dependent spouse “engages in cohabitation.” Alimony terminates when cohabitation has an economic impact on the dependent spouse. Public policy dictates that a supported spouse should not be able to avoid in bad faith the termination of alimony that would result from remarriage while engaging in a relationship that has most of the characteristics of remarriage. “Cohabitation” means continuous and habitual living together with evidence of “the voluntary mutual assumption of those marital rights, duties, and obligations which are usually manifested by married people.” A North Carolina court of appeals decision found that “cohabitation” existed when a couple had been in a monogamous relationship for ten months and slept over up to five times per week. However, a court might also (in a rare case) find cohabitation to exist when the parties did not ever spend the night together. Factors such as whether the parties maintain separate residences, and where they keep personal belongings, are factors courts can consider. The more “rights, duties, and obligations” associated with cohabitation, the more likely it is to have an economic impact on the dependent former spouse, and the more it will appear that the dependent former spouse is avoiding the formalities of marriage primarily in order to continue receiving alimony. Factors include how the members of the couple share household chores and child care duties, whether they have co-mingled their finances, how they hold themselves out to society, whether they go out in public together and attend worship services together, whether they vacation and spend holidays together, and even whether they kiss when leaving for work in the morning. However, activities such as walking the dependent party’s dog, parking in that party’s garage, moving furniture into the party’s home, carrying in groceries, spending 11 consecutive nights together, etc. were help not to support a finding of cohabitation. Whether a relationship is exclusive and monogamous is an especially important factor in determining whether cohabitation exists. Actual sexual intercourse between the dependent spouse and the new partner is not required in order for there to be cohabitation that will terminate alimony. Living with roommates or family members is not considered “cohabitation,” although this can reduce a party’s expenses and have an impact on the amount of support, as discussed above. One difficulty is that cohabitation, unlike remarriage, may not have a definite start date. At the latest, courts will date the cohabitation to the date that one party brings a motion to terminate support based on it. If you need to speak with a family law attorney concerning alimony and/or termination of alimony, contact Adkins Law. Adkins Law is located in Huntersville and primarily serves the Lake Norman area and Mecklenburg County. 1) How long do we have to be separated before we can file for divorce in NC? Under North Carolina General Statute (N.C.G.S.) § 50-6 provides that either party may apply for divorce but only “if and when the husband and wife have lived separate and apart for one year, and the plaintiff or defendant in the suit for divorce has resided in the State for a period of six (6) months.” 2) How long will divorce process take once the complaint is filed? It depends each county in North Carolina is different and has its own local rules and procedures when processing a complaint for absolute divorce. When the plaintiff files a complaint for absolute divorce, a defendant is entitled to 30 days to respond to the lawsuit. A defendant is may ask the Court for additional time in which to respond and in most cases a Court will allow a permit an additional 30 days for the defendant to respond to the complaint. If a defendant fails to respond to the complaint within 30 or 60 days if applicable, the plaintiff is entitled to proceed with their claim for absolute divorce. In Mecklenburg County, unlike some other counties, no court appearance will be required by either party for a Court to enter a judgment of absolute divorce. 3) What factors does the court look at in determining alimony? Under N.C.G.S. § 50-16.3A(a), “the court shall award alimony to the dependent spouse...upon a finding that the other spouse is the supporting spouse, and that an award of alimony is equitable after considering all relevant factors, including those set out in subsection (b) of this section.” N.C.G.S. § 50-16.3A(b) “In determining the amount, duration, and manner of payment of alimony, the court shall consider all relevant factors, including: (1) The marital misconduct of either of the spouses. [The court will consider all evidence of martial misconduct that has occurred during the marriage and prior to the date of separation.]; (2) The relative earnings and earning capacities of the spouses; (3) The ages and the physical, mental, and emotional conditions of the spouses; (4) The amount and sources of earned and unearned income of both spouses, including, but not limited to, earnings, dividends, and benefits such as medical, retirement, insurance, social security, or others; (5) The duration of the marriage; (6) The contribution by one spouse to the education, training, or increased earning power of the other spouse; (7) The extent to which the earning power, expenses, or financial obligations of a spouse will be affected by reason of serving as the custodian of a minor child; (8) The standard of living of the spouses established during the marriage; (9) The relative education of the spouses and the time necessary to acquire sufficient education or training to enable the spouse seeking alimony to find employment to meet his or her reasonable economic needs; (10) The relative assets and liabilities of the spouses and the relative debt service requirements of the spouses, including legal obligations of support; (11) The property brought to the marriage by either spouse; (12) The contribution of a spouse as homemaker; (13) The relative needs of the spouses; (14) The federal, State, and local tax ramifications of the alimony award; (15) Any other factor relating to the economic circumstances of the parties that the court finds to be just and proper. (16) The fact that income received by either party was previously considered by the court in determining the value of a marital or divisible asset in an equitable distribution of the parties' marital or divisible property.” 4) What if I am military and live out of state? Can our divorce still be filed in NC? Yes, as long as one party resides in North Carolina for six months. The divorce will have to be filed in the county the NC resident resides in. 5) Is spousal support available while divorce is pending in court or only after the divorce has become final? It is up to the court to order that one spouse provide support to the other during the pendency of the divorce action and/or after the divorce has become final. Also, support that is awarded pending the final decree of divorce is not to extend beyond the period necessary for the prosecution of the divorce action. 6) When is considered to be abandonment by spouse? Abandonment occurs when a spouse intentionally moves out of the martial home with the intent to remain permanently apart without the consent of the other spouse, and without provocation by the other spouse. 7) Is your spouse entitled to alimony if they cheated on you? No. Under N.C.G.S. § 50-16.3A(a) provides that a spouse that is found dependent by the court is not entitled to alimony if he or she has had sexual relations with another person that is not their spouse at any time prior to the date of separation. 8) What if my spouse does not agree to the divorce, can I still go forward with the divorce? Yes. You can obtain a divorce decree whether your spouse agrees with it or not, as long as you and your spouse have been separated for one-year and one of you has been a resident of North Carolina for six-months prior to the filing of this divorce action. 9) What are the types of divorce that NC recognizes? North Carolina is a “no-fault” state which means that neither party has to prove fault of the other in order to file or be granted a divorce decree, you are only required to be separated for one-year and one of the spouses must have resided in NC for six-months prior to filing for divorce. Further, North Carolina recognizes two types of divorces: (1) “absolute divorce” and (2) “divorce from bed and board.” (1) “Absolute divorce” is like a no-fault divorce, either party can obtain, once you and your spouse have lived separate and apart for one-year. (2) “Divorce from bed and board” is not technically a divorce but rather a judicially authorized legal separation. There are six grounds for this type of divorce based on injury to the party filing for divorce as provided under N.C.G.S. § 50-7. “The court may grant divorces from the bed and board on application of the party injured…in the following cases if either party: (1) Abandons his or her family, or (2) Maliciously turns on the other out of doors. (3) By cruel or barbarous treatment endangers the life of the other. In addition, the court may grant the victim of such treatment the remedies available under N.C.G.S. § 50B-1. (4) Offers such indignities to their spouse as to render the condition his or her condition intolerable and life burdensome. (5) Becomes an excessive user of alcohol or drugs so as to render the condition of the other spouse intolerable and the life of the spouse burdensome. (6) Commits adultery.” [NCGS § 50-7] 10) Does North Carolina recognize common law marriage? No, North Carolina does not recognize common law marriage. If, however, you moved to North Carolina from a state recognizing common law marriage, you still may need to file for an absolute divorce. If you need to arrange a consultation with a family law attorney concerning separation and/or divorce, contact Adkins Law. We have locations in Huntersville and Ballantyne for your convenience. What is the Recapture Rule? If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. The reasons for a reduction or end of alimony payments that can require a recapture include:
The recapture rule forces the alimony payer, usually the ex-husband, to report as income the alimony payments he previously deducted, which means the ex-wife is entitled to reduce from income the alimony payments she previously received. When does the Recapture Rule Apply? The rule applies when the payments decrease or terminate during the first three calendars years post-divorce and: 1.) The total payments made in the third year decrease by $15,000 or more from the payments made in the second year; or 2.) The payments made in the second year and the third year are substantially less than the payments made in the first year. Recapture Rule & Filing Taxes: a) Including the recapture amount in your income: If you must include a recaptured amount in income, show it on Form 1040, line 11 (“Alimony received”). Cross out “received” and enter “recapture.” On the dotted line next to the amount, enter your spouse's last name and SSN or ITIN. b) Deducting the recapture amount: If you can deduct a recaptured amount, show it on Form 1040, line 31a (“Alimony paid”). Cross out “paid” and enter “recapture.” In the space provided, enter your spouse's SSN or ITIN. Exceptions to the Recapture Rule? The Recapture Rule does NOT apply to the following:
If you need to speak with a family law attorney in regards to alimony, contact Adkins Law. Adkins Law has offices in Huntersville and Ballantyne for your convenience. Step 1. Determine which payments you made qualify as alimony. Payments that are NOT alimony: Not all payments under a divorce or separation instrument are alimony. Alimony does not include:
Requirements for a payment to be alimony:
General Rules for alimony payments:
Step 2. Mark down alimony payments made or received on your taxes: a) How to Deduct Alimony Paid on your Taxes:
b) How to Report Alimony Received on your Taxes:
For more information go to https://www.irs.gov/publications/p17/ch18.html. If you would like to speak with a family law attorney in regards to alimony, contact Adkins Law. Adkins Law has offices in Huntersville and Ballantyne for your convenience. At Adkins Law, we believe in providing top-notch, quality legal services at affordable prices. If you need to speak with an attorney regarding a family law matter, traffic citation or issue, or for your estate planning needs, contact Adkins Law to arrange a consultation. Adkins Law has offices in Huntersville and Ballantyne for your convenience. |
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