One of the most unsettling question marks in a divorce case is the cost of attorney fees. In an uncontested case the fees can usually be fixed as a flat fee. However, in a contested case the fees are usually billed at an hourly rate. Why the difference?

In an uncontested case  your spouse does not contest the proceedings, so your lawyer can estimate how much time it will take to complete your side of the divorce based on their prior experience, i.e., the lawyer can predict how much time they will spend to get your matter finalized.

In a contested case your spouse contests the proceedings, so your lawyer cannot predict how long it will take for your case to be finalized. Your spouse may agree to everything that you propose on or before your first court date. Or your spouse may fight every settlement proposal and take unreasonable positions on every issue. A contested case may be resolved after one court appearance, or the case may not resolve even after multiple court appearances and numerous court filings. A contested case may not settle at any point, and may have to be tried in front of a judge. Because of the unpredictability of a contested case lawyers set hourly rates for their work in these cases.

Can I Make My Spouse Pay My Attorney Fees?

In an uncontested case the court will generally not award attorney’s fees against the non-contesting party. However, in a contested case there are a few situations in which the court may make your spouse pay or contribute to your attorney fees. The top two reasons that a court may award counsel fees are either a parties bad faith and/or a  parties lack of money,

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Similar to the requirement that life insurance be purchased by a parent who will be paying child support, a spouse who will be paying alimony to their ex-spouse must also obtain life insurance to cover their alimony payments in the event of the paying spouse’s death. The amount of life insurance to be purchased is calculated by multiplying the amount of alimony to be paid by the term, in years, of the alimony payment.

For example, if after a settlement or trial the  husband is ordered to pay his ex-wife term alimony of $2000 per month for 7 years, he will pay her a total of $168,000 in alimony over the 7 year period ($2000/month x 12 months = $24,000/year x 7 years = $168,000 total alimony payments). To cover his alimony obligation he will have to obtain life insurance in the amount of $168,000, naming his ex-wife as the beneficiary on the policy in the event of his death. As he pays the alimony and the total balance owed decreases he can reduce the amount of life insurance that is required to cover the alimony obligation.  However, what happens if husband is required to pay permanent alimony?

In the situation where husband is required to pay permanent alimony the term of the life insurance obligation is usually split into two parts: pre-retirement alimony and post-retirement alimony. An example will help to explain the concept. Let’s say that husband is 55 years old and the divorce settlement calls for him to pay permanent alimony of $2000 per month to his ex-wife. A reasonable retirement age for husband would be between 67 and 70 years old. The parties can agree to peg pre-retirement life insurance coverage to cover payments of $2000 per month until husband’s retirement at 69 (1/2 way between 67 and 70). If husband is 55 years old his pre-retirement alimony obligation would be for 14 years. His estimated alimony obligation pre-retirement would be $336,000 calculated as follows: ($2000 per month x 12 months = $24,000 per year x 14 years = $336,000). Continue reading →

New Jersey Statutes (NJS) 2A: 12-7 States: 

Legislative Findings and Declarations
  a. In the area of child visitation a court often orders 
supervised visitation where there has been a history of child abuse, medical
disabilities, psychiatric problems or other situations where the 
safety and welfare of the child may be jeopardized.

Contrary to many parents belief supervised visitation is not awarded because of one parent’s subjective feelings about the other parent’s parenting skills. Supervised visitation is generally limited to situations, as described above, where a judge is persuaded (with evidence) that the non-custodial parent may endanger the child if they are left alone with them – hence the need for supervised visitation. Examples of situations where supervised visitation is appropriate are:

  • The non-custodial parent has physically or emotionally harmed the child in the past. Documentation of the harm is the best evidence.

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While you are married you can be covered under your spouse’s health insurance because of your legal status as their husband or wife. If a divorce is commenced, during the divorce, you can maintain the health insurance because until the judgement of divorce is granted you are still husband and wife. In fact, at the time that the complaint for divorce is filed the filer must fill out and submit an insurance affidavit which lists all of the active insurance that is in effect, including health insurance. As well, the filer must state in the affidavit that they have not canceled or otherwise modified that insurance within 90 days of filing. However, once the divorce judgment is granted you are no longer husband and wife and you lose the married status for purposes of health insurance coverage. It is actually insurance fraud if you keep your spouse on your health insurance plan as your spouse after your divorce is finalized. Continue reading →

Since the 2008 mortgage crisis New Jersey home values have taken a substantial hit, losing approximately one-third of their value in some communities. Over the past couple of years values have been on the rebound. However, the pace has been very slow.

If you’re going through a divorce, your home has negative equity, you are behind in mortgage payments, and a foreclosure is on the horizon what are your options for the house, and what is your smartest move?

If You Want To Keep The House

If you want to keep the house one option is to seek a loan modification from your bank. In this scenario you will ask your lender to take the total amount of the late mortgage payment balance and roll it into your loan – basically extending the term of your loan. This may allow you to hold onto your house and wait for its value to rise over time. Another option, if the circumstances make financial sense and your spouse is on the loan with you is to attempt to assume the loan in your sole name. A third option which involves you keeping the house is to refinance the property to remove your spouse, roll the overdue mortgage payments into the refinance, and hopefully lower your interest rate and payments. Each of the above scenarios involve you carrying potentially heavy debt. As I stated in my previous blog post entitled Right To Stay in The House After Divorce In New Jersey( hyperlink) there are a number of questions that you should ask yourself to determine whether it makes financial sense to remain in your home (whether it has positive or negative equity). If, after answering the questions you decide that it makes financial sense to stay in your home, you can pursue a loan modification, a loan assumption (if your bank offers this option), or a refinance.

If You Decide To Leave The House

If you decide that you will be leaving the house, you have a few options on how to leave. You can opt for a short sale or you may attempt to transfer the house back to the bank in a process called a deed-in-lieu of foreclosure. Alternatively, if the bank is not receptive to a deed-in-lieu or foreclosure or a short sale, you may have no choice but to let the house go into foreclosure. Continue reading →

The IRS treats canceled debt as income. This means that when a creditor cancels or forgives debt the amount of the canceled or forgiven debt is treated as income to the person forgiven.

For example, if you and spouse settled joint credit card debt for less than the amount owed you will receive a 1099 reflecting the amount forgiven. Similarly, if you sell your home as a short sale, sign a deed in lieu of foreclosure, or have your home foreclosed upon you may receive a 1099 for the amount of the debt that was forgiven.

The following example will help illustrate how canceled debt operates in the context of a short sale. If a husband and wife sell their house at a short sale for $385,000 but they owe $485,000 on the mortgage, the canceled debt is $100,000. While the bank is forgiving the $100,000 shortfall, the IRS is treating the $100,000 canceled debt as income to the husband and wife. The IRS learns about the canceled debt because the bank sends you and the IRS a Form 1099 which reports the amount of canceled debt. Having received the Form 1099 notice of canceled debt from the bank, the IRS is expecting you to report and pay taxes on that canceled debt. Continue reading →

Other than real estate, often times the largest assets to be distributed in a divorce are the parties retirement assets. Retirement assets include pensions, IRAs, 401ks, 403Bs, deferred income, and other funds allocated for retirement. The question arises – how are the assets physically distributed? What mechanism is used to transfer the funds from one party to the other? The answer is the qualified domestic relations order (QDRO).

A QDRO is a court order directed to the administrator of the retirement asset that needs to be divided.  A QDRO is necessary because the administrator of the retirement asset cannot transfer any portion of one party’s retirement asset to anybody else without a court order. The QDRO is that court order. It as an order which is prepared and forwarded to the judge in the divorce case for the judge’s review and signature. The order orders, empowers and authorizes the retirement account administrator to transfer retirement funds from one party to another during or after a divorce. Decades ago attorneys prepared QDROs and submitted them to the courts. However, over the past 20 years an entire industry has grown up dedicated to creating QDROs. These third-party QDRO preparers produce QDROs at a much cheaper cost (usually $400 – $500 per QDRO) than attorney-generated QDROs. For the clients it is a savings. For attorneys it means that they can outsource the QDRO preparation to experts who will be responsible for drafting the court-ready documents. The attorney’s role is to review the documents and make sure that they cover the necessary issues. Continue reading →

Generally speaking, in a New Jersey divorce, the parent who has to pay child support is required to carry life insurance. The rationale for requiring the person paying child support to maintain life insurance is that the child support obligation is a multi-year obligation. If the person paying child support dies without life insurance there will be no stream of income to cover the expense of raising the child to adulthood. If there is a life insurance policy in effect there will be a pot of money if the parent dies to support the child throughout their developmental years. The amount of life insurance that the paying parent has to obtain is usually based on the projected cost of child support over the years that it will be paid. The amount of insurance will also include an estimate of the parent’s projected contribution to the child’s college costs.

For example, let’s say a father is ordered to pay $150/week for child support for his 5 year old daughter. His annual child support obligation is $780o per year ($150/week for 52 weeks). He will be paying child support for a minimum of 13 years. Therefore, his basic child support obligation is $101,400 ($7800year  x 13 years). Assuming that his daughter attends college he will also have a 4-year college expense obligation. Assuming further that her net college tuition and expenses are $25,00o per year and he is obligated to contribute 50% of the outstanding amount, his expected college contribution will be $12,500/year x 4 years = $50,000. He will need to have a life insurance policy for a minimum of $150,000 to cover his projected child support and college expense contribution. The obligation to carry life insurance for his child will cease at the point of his daughter’s emancipation.

A common question is whether the non-custodial parent can use the life insurance that they have through work to cover their child support obligation. The answer is yes, the insurance can generally be obtained from any source, as long as it covers the support obligation.  A less frequent question is what happens in the event that the non-custodial parent cannot obtain life insurance at a reasonable price, either because of a previous or existing medical condition, or because of their health (e.g., they are smokers). This latter situation defies easy answers and will be dependent on the specific facts of the case. It should be noted that the life insurance acquired does not have to be a whole life policy. Term life insurance is widely available, and can provide hundreds of thousands of dollars of coverage at affordable rates. Continue reading →

The New Jersey family courts make it very simple for a wife to resume her maiden name at the conclusion of her divorce case. In order to take advantage of the opportunity for a name change the wife should make the name change request in her complaint or counterclaim for divorce. Once she makes the request in her initial pleading the wife does not have to address the name change issue again until the day that the final divorce is entered.

On the day of the divorce the court will require the name that the wife is intending to resume, her social security number (last 4 digits), and her date of birth. Either the court or the wife’s attorney will ask the wife a series of questions related to the reasons why she is requesting the name change. The questions are generally along the following lines:

1. Do you have any civil judgments or pending civil judgments against you in your married name?

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On top of basic child support both parents have a duty to contribute to the cost of the custodial parent’s work-related childcare expenses.Work-related childcare expenses are not limited to the cost of placing a child in daycare. Work-related childcare can also include: after-school care, care provided prior to school, having a person in your house who cares for the child (e.g., a nanny), care provided during the summer months at a daycamp, or other camp.

With regards to childcare, one of the more common areas of disagreement between parents is: who decides where the child will go for childcare? One parent may be insistent on a childcare experience which includes an educational and socializing experience for the child outside of the house, whereas the other parent may not want their child left with “strangers”, and they will insist on family members taking care of the child.

Another area of disagreement is how much should be paid for daycare. The childcare provider whose program includes an educational and socializing component is usually much more expensive than the family member caregiver. As well, the parents have to figure out whether full-time or part-time care makes more sense. Continue reading →