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When Federal Bankruptcy Law collides with Your Arizona Family Law Case

Wednesday, October 7th, 2009

One of the most common areas in which bankruptcy and family law cases collide pertains to a bankruptcy debtor attempting to discharge a debt or obligation owed to his or her spouse or ex-spouse.

 

Prior to the significant changes in 2005, a debtor could argue in his or her Chapter 13 Bankruptcy that the spousal support ordered previously in a State Superior Court divorce imposed a financial hardship.  In certain cases where financial hardship was appropriately demonstrated, the Courts would then allow for the spousal support obligation to be discharged in the bankruptcy. 

 

With the changes in 2005, Federal Bankruptcy Law simply does not allow for the discharge or elimination of spousal maintenance or child support (together referred to under the bankruptcy code as domestic support obligations) under any circumstances.  See 11 U.S.C. § 523(a)(5).  Further, the Bankruptcy Code defines domestic support obligations quite broadly, as a debt that “accrues before, on, or after the date of the order for relief in a case under this [bankruptcy] title, including interest that accrues on that debt as provided under applicable non-bankruptcy law . . . that is owed to or recoverable by a spouse, former spouse, or child of the debtor or such child’s parent, legal guardian, or responsible relative; or a governmental unit.    11 U.S.C. § 101 (14A). 

 

While debts for domestic support obligations, 523(a)(5), cannot be discharged in any type of bankruptcy, other debts owed to a former spouse can be discharged in a Chapter 13 case.  These debts are listed in 11 U.S.C. 523(a)(15) and include debts “to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit. 

 

There is some speculation in the case law that Congress may have inadvertently omitted (a)(15) debts from the list of debts that cannot be discharged in a Chapter 13 case.  Nonetheless, 523(a)(15) is not on the list found in 11 U.S.C. § 1328(a)(2) which itemizes those debts not dischargeable in a Chapter 13 case, and Bankruptcy Judges have determined that their job is not to question Congress, but to follow the law as it is written, and have accordingly established case law permitting the discharge of non-support obligations to a spouse or former spouse or a child through a Chapter 13 Bankruptcy.

 

Accordingly, the question that immediately arises is:  What debts to former spouses will be non-dischargeable  as maintenance or support under (a)(5), and which debts will be discharged as other obligations under (a)(15).  Bankruptcy case law has made it clear that the title or nomenclature used in state court is not binding, and that the Court must make an independent determination categorizing the debt.  Furthermore, federal law is utilized in determining if the recipient needed spousal support, rather than state law.  In re Strickland, 90 F.3d 444, 446 (11th Cir. 1996); Harrel v. Harrel, 754 F.2d 902, 905 (11th Cir. 1985). 

 

Issues often arise in cases which parties and attorneys  make decisions for tax purposes or bankruptcy purposes to call debts equalization payments rather than spousal maintenance, or spousal maintenance instead of an equalization payment.  Practitioners must understand that simply calling an equalization payment “spousal maintenance” in a property settlement agreement or a consent decree will not automatically protect that debt from being discharged as a debt owed to a former spouse under (a)(15). 

 

One factor that the Courts will consider is the name given.  However, the Bankruptcy Court must look beyond the label and consider the circumstances of the payor and the payee.    Cummings v. Cummings, 244 F.3d 1263, 1265; (11th Cir. 2001).

 

HYPOTHETICAL #1:  Is the Debt Non-Dischargeable Support, or Dischargeable Property Equalization?

 

Let’s examine this through a hypothetical case:  Several years ago, PAYOR and PAYEE entered into a settlement agreement after extensive negotiations.  PAYOR would receive the business, and PAYEE would receive the real estate and certain other assets.  The settlement agreement then stated that PAYOR would pay PAYEE $X,XXX.00 per month for 5 years as and for a property equalization payment. 

 

On its face, because it is titled “property equalization,” PAYOR is able to file a Chapter 13 bankruptcy and seek to have the debt discharged.  However, PAYEE may decide to fight this case in Federal Court, challenging the discharge and claiming that the debt arises under (a)(5), and not under (a)(15).  The Bankruptcy Court must then make an independent determination classifying this debt as either 1) spousal maintenance, 2) equalization payment, or 3) a hybrid or combination of spousal maintenance and equalization payments.  If the debt is determined to be spousal maintenance, it is not dischargeable under 11 U.S.C. 523(a)(5).  If the debt is determined to be an equalization payment, the debt would be dischargeable under 11 U.S.C. 523(a)(15).  If the Court determines that it is a hybrid, the Court must determine the portion that was truly support in nature and allow this claim to be non-dischargeable in the bankruptcy, and permit the remainder to be discharged in the bankruptcy.

 

Any practitioner who has been involved in negotiations understands how under these limited facts, the actual need could have been either support or equalization.  The parties and attorneys may have called this equalization so that PAYEE could shortly remarry, and still receive her support, rather than agreeing to non-terminable spousal support.  The parties could have agreed to designate this as an equalization payment to prevent the tax burden from being shifted to PAYEE from PAYOR.

 

Depending upon the circumstances, PAYEE could have been in need of short term spousal maintenance, which may have comprised some piece of the full series of payments agreed to by the parties; PAYEE could have been in need of long term spousal maintenance, which may have comprised a larger piece of the full series of payments or even the entire series of payments; or the entire series of payments could have been exactly what it was designated, an equalization payment. 

 

In a contested trial in the Bankruptcy Court, a finding that PAYOR’s business was $1,000,000.00 more valuable than PAYEE’s real estate, would lead to the conclusion that the $500,000.00 equalization payment was required to equalize the distribution of these two assets.  Conversely, PAYEE would want to show that she was in need of long term support at the time of the dissolution of marriage and that her real estate had the same approximate value as PAYOR’s business (eliminating any need for an equalization payment).

 

The 2005 change in Federal Bankruptcy Law removing the power from the Bankruptcy Court to discharge a debt for spousal maintenance can be justified by the fact that child support and spousal maintenance are modifiable, and the debtor can go back into the state court and argue that his support obligation needs to be changed because of his or her change in circumstances.  Thus, the debtor is not without recourse, just without recourse in the Bankruptcy Court. 

 

However, A.R.S. § 25-319(C) adds a dangerous element to this type of case in Arizona.  A.R.S. § 25-319(C) provides that by agreement of both parties, the spousal maintenance can be designated as non-modifiable.  By so designating the payments, the payor has now lost the ability to go back into State Court and to argue that his or her payments should be reduced or eliminated due to a change in financial circumstances.  The debtor can no longer argue for this in Bankruptcy Court, which until 2005 court have discharged the spousal maintenance whether or not it was designated as modifiable.  The only avenue of recourse now remaining for the Debtor is to go into Federal Court in a Chapter 13 case, and argue that all or at least most of his payments were for non-support purposes.  Perhaps the “non-modifiable” terms of the agreement will provide some support the Payor’s claim that this was a non-support payment, because the support was to persist regardless of the Payee’s continued need for such support.  However, the Court must look at the full picture.

 

 

HYPOTHETICAL #2:  Should I Seek To Eliminate The Obligation In A State Court Post Dissolution Case or a Bankruptcy?

 

In another type of case, the difference in the Federal Bankruptcy Law pertaining to spousal support applied by the Bankruptcy Courts and Arizona Law set forth in A.R.S. § 25-319(A-B) and its related case law can cause problems. 

 

To create another hypothetical, suppose PAYOR brings a post-dissolution case in the State Court to terminate a spousal maintenance claim.  Further, suppose that PAYOR’s claim is that the monthly payments to the ex-spouse and the obligation to continue to pay the ex-spouse’s insurance through the business assigned to PAYOR during the marriage are both in the form of spousal maintenance.  The State Court may agree that the monthly payments are support and terminate this support obligation, and at the same time the State Court may not agree that the payment of insurance is support but rather an equalization payment based upon the award to PAYOR of the full business. 

 

Under this hypothetical, the State Court could only terminate the spousal maintenance provisions, but would not have the ability to terminate the non-support equalization payments.  If PAYOR then decides to pursue a Chapter 13 Bankruptcy, PAYOR could request to have the non-maintenance payments towards the ex-spouse’s insurance discharged under (a)(15).  Federal law would look to see if these payments were related to the support of the ex-spouse, and providing medical insurance could be argued to be supportive in nature, despite the State Court’s prior ruling.  Accordingly, the Federal Bankruptcy Court may determine that the payment of medical insurance is support, and is therefore not dischargeable under (a)(5).   To resolve such a potential problem, PAYOR and his or her attorney would want to lock PAYEE into specific testimony at the first trial as to whether PAYEE believes the payments are support or equalization in nature.  Once PAYEE is locked into one side, principles of estoppel could be used when PAYEE later seeks to argue the other side in the second trial.  Furthermore, while not binding, the State Court’s ruling on this issue would be extremely influential to the Bankruptcy Court.

 

Ultimately, most payments to a former spouse can be eliminated, if the payor’s circumstances have dramatically changed for the worse.  Support payments and other “domestic support obligations” must be modified or eliminated through the state court post decree modification process, and non-support payments can be eliminated through a Chapter 13 Bankruptcy proceeding. 

 

HYPOTHETICAL #3:  Can I discharge unusual obligations to a spouse through a Chapter 7 case filed before the divorce is finalized?

 

 

One final hypothetical illustrates a difficult situation that may occur in cases where a federal bankruptcy and a state divorce are sought simultaneously or nearly simultaneously.  Upon the filing of a bankruptcy, federal law imposes the Automatic Stay, which, similar to the Preliminary Injunction automatically arises in each case immediately upon filing.  As discussed in the article by this same author entitled Bankruptcy Issues in Family Law Cases,  published in the May 2009 edition of this Family Law News publication, the Automatic Stay (11 U.S.C. § 362)  precludes the State Court from proceeding with the division of assets and debts unless and until the stay is lifted by the Court during the pendency of the bankruptcy, or at the conclusion of the bankruptcy case by operation of law.  At the conclusion of a successful bankruptcy, the temporary Automatic Stay is replaced by the permanent Discharge Injunction (11 U.S.C. § 524 (Effect of Discharge)).  This permanent discharge provides:

 

(a)  A discharge in a case under this title –

(1)  Voids any judgment at any time obtained, to the extent that such judgment is a determination of the personal liability of the debtor with respect to any debt discharged (in a Chapter 7, 9, 11, 12, or 13) . . .

(2)  Operates as an injunction against the commencement or continuation of an action . . . to collect, recover, or offset any such debt as personal liability of the debtor . . .

 

As discussed above, spousal support would not be dischargeable under either a Chapter 7 or Chapter 13, where as a property equalization payment is dischargeable under a Chapter 13 but not under a Chapter 7.  However, in a case where a client knows he or she may be required to make a payment that is neither equalization nor maintenance to a former spouse, this hypothetical will explore what would occur if a party files for and successfully obtains a Chapter 7 discharge after the dissolution of marriage case has been filed, but before the dissolution case is finalized at the State Court. 

 

An important bankruptcy concept is understanding when a claim arises or a debt exists.  11 U.S.C. 101 (5) provides the definition of a “claim” as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured . . .”  Furthermore, a debt in bankruptcy is defined by 11 U.S.C. 101(12)  as a “liability on a claim.”  Because of this broad definition of claim and debt, bankruptcy cases have often found that the claim or debt existed as soon as either party understood that a disagreement may arise in the future.

 

By completing the Chapter 7 case and receiving the Chapter 7 discharge while the divorce case is pending, the debtor must still make any payments to his PAYEE or child that fit under the exceptions to discharge contained in both 11 U.S.C. 523 (a)(5) and (a)(15).  However, by obtaining the discharge, and having listed his or her soon-to-be ex-spouse in the bankruptcy as having a potential claim, the debtor may have prevented the Court from going forward in making a determination of other types of liabilities, such as a tort claim, a claim for contribution to jointly owned property, and other pendant claims being aired in the divorce that are not support or property equalization issues. The discharge injunction, as stated in 11 U.S.C. 524, quoted above, “voids any judgment at any time obtained” that would be discharged in a bankruptcy and further “operates as an injunction against the commencement or continuation of an action . . . to collect, recover, or offset any such debt.”  It becomes clear from the broad definition of claim and debt, 11 U.S.C. 101, that if such debt is a part of the divorce case, that the claim has arisen with the commencement of the divorce case, if not even before that. 

 

Debts that qualify under either 11 U.S.C. 523(a)(5) or (a)(15) are not discharged in a Chapter 7 Bankruptcy.  At first glance, the definition of (a)(15) may cause a practitioner to believe that all debts to a spouse or former spouse must fall under one of these two categories ((a)(15) states ““to a spouse, former spouse, or child of the debtor and not of the kind described in paragraph (5) . . .”  While this language does make it clear that not all debts to a spouse or former spouse are “domestic support obligations,” the full language does leave room for a third category. 

 

The first category is domestic support, which would include debts to a spouse, former spouse, or child of the debtor and . . . of the kind described in paragraph (5.)  The second category would include debts to a spouse, former spouse, or child of the debtor (not domestic support) that is incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit.  The third category would include debts to a spouse, former spouse, or child of the debtor (not domestic support) that is incurred by the debtor but not  in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court of record, or a determination made in accordance with State or territorial law by a governmental unit.  At first, the practitioner may observe that the difference between the second and third category is only a matter of timing, in that the Divorce Court just has not had the opportunity to accept the separation agreement, enter the decree or other order of the court.  Perhaps this observation is correct, however the difference in timing is important.  Once the discharge is obtained in a Bankruptcy, the State Court is prevented by the discharge injunction of 11 U.S.C. 524 from accepting the separation agreement or entering the decree or other order of the court.

           

            If this strategy is to be used, the Chapter 7 Bankruptcy must be filed before the State Court enters an order or decree or accepts the separation agreement of the parties.  The Chapter 7 discharge must be obtained prior to any order being entered against the spouse.  (Once the case is filed, the automatic stay makes this second task quite simple).  Once an Order has been entered or a separation agreement has been accepted by the Court, the pendant claim is now a part of the divorce and would be difficult to separate out from other debts dischargeable only through a Chapter 13 as claims under 11 U.S.C. 523(a)(15).  By failing to advise a client of the need to file a simpler and cheaper Chapter 7 Bankruptcy, the client may be left with the only option being to file a more costly and complicated Chapter 13 case to discharge his liability on a pendant claim included in the divorce case. 

 

            This strategy will not work in an equitable division of assets and debts situation, as the State Court, charged with equitably dividing assets and debts of the parties could easily divide the assets in such a way that the debtor would not be required to pay any monies to the spouse or ex-spouse.  Furthermore, an equalization payment does not arise until the assets and debts are divided, and would therefore not have been a claim that existed prior to the commencement of the Chapter 7 Bankruptcy filing, and would not have been discharged in the bankruptcy case.  While most obligations that arise from a divorce will be either support in nature or property equalization in nature, this strategy may work in cases where one spouse has asked the Court to utilize pendant jurisdiction to hear other types of claims not typically associated with a divorce case.

 

            Because of the tremendous increase in bankruptcy filings, family law practitioners will continue to be faced with questions and concerns from clients and prospective clients that require explaining Arizona divorce law as well as aspects of Federal Bankruptcy Law.  The family law practitioner must continue to increase his or her understanding of bankruptcy to properly advise clients, and must also know and understand when aspects of a particular case are over that  practitioner’s level of understanding.  When in doubt, be sure that you have a bankruptcy attorney on your speed-dial to discuss your difficult cases. 

For more information, please visit our website at www.mcguiregardner.com

WHAT HAPPENS TO THE MARITAL RESIDENCE IN A DIVORCE?

Monday, September 28th, 2009

Many divorce clients are faced with the issue of having a single piece of real estate, which cannot readily be divided into two dwellings.  Their reasonable question is: what are the alternate ways of dividing the real estate?

 

In a divorce, the Court must equitably divide joint and community property.  As the house is not divisible, the three remaining alternatives are:  1) Husband buys out Wife; 2) Wife buys out Husband, and 3) The property is sold and the proceeds divided. 

 

While the first two scenarios may often be the simplest, there are still many potential issues.  Some of the difficulties include: how to arrive at a fair valuation of the real estate; should hypothetical real estate commissions be considered; who pays for the mortgage and utilities until the house is transferred; will the mortgage be transferred into the name of only one party; what is the time frame in which payment must be made; will the spouse being bought out have a security interest in the property until paid in full?

 

When the house is to be sold, and the proceeds to be divided, the potential issues are different.  Some of the difficult issues include: Who picks the sales price; Who selects the real estate professional; Who determines which offers to accept and which to counteroffer; Who, if either, remain living in the house until sold; Who is responsible for payment of the mortgage, utilities, and other expenses; Who is responsible for keeping the house in showable condition?

 

Once the house is sold, the parties also need to determine how to divide the equity.  Will the equity be used first to pay off certain debts of the parties?  Is one side of the other entitled to a disproportionate share of the equity to equalize other aspects of the divorce? 

 

Another variation to this third alternative is when neither party can afford the house, and the parties agree to allow the house to go into foreclosure and/or both parties anticipate filing for bankruptcy during or after the divorce. 

 

Because of all of these complexities, parties going through a divorce who own one or more pieces of real estate should have an attorney to ensure that their rights are protected and that any written agreement is explicit enough to avoid future litigation over ambiguous settlement terms.

For more information, please visit our website at www.mcguiregardner.com

Phoenix Bankruptcy Attorney comments on loan modification report.

Thursday, August 13th, 2009

A recent Treasury Department report shows that only about 9 percent of borrowers eligible for trial modifications under the Obama administration’s new plan have received loan modification help.  Despite the fact that millions of dollars have been given to the nations banks to assist struggling homeowners, the plan has met with little success. 

The report indicates that Bank of America Corp. and Wells Fargo Bank have started trial modifications for only 4 and 6 percent, respectively, of the eligible mortgages in their servicing portfolios.  JPMorgan Chase & Co. has started trial modifications for 20 percent of eligible loans, a much higher number. 

This report makes clear that the loan modification progran is not having the desired result.  We often meet with clients who are extremely frustrated with the lack of help they receive from their bank.  Unfortunately, many of these clients must file bankruptcy to save their house.  If you are interested in finding out more information about loan modification, or bankruptcy, please visit our website at www.mcguiregardner.com to see how we can help you today.

PHOENIX BANKRUPTCY LAWYER COMMENTS ON ABILITY TO KEEP A HOUSE WITHOUT KEEPING A SECOND MORTGAGE

Thursday, August 6th, 2009

Due to the current low values of homes in Arizona, many of our clients find that the value of their home is less than their first mortgage, and that their second (and even third and forth) mortgages are completely upside down. 

In these cases, when the client wishes to keep their home, we often recommend doing a Chapter 13 bankruptcy which in many cases will allow the liens with no equity in them to be stripped off (eliminated) in the bankruptcy.  In other words, the lien is treated the same as unsecured credit card or medical debts, and the client can keep the house and continue to pay only the first mortgage.  The subsequent mortgages may get paid a few cents for every dollar owed them, just as the credit card companies.  In some cases, the credit card companies and the subsequent mortgages will not be paid any amount at all. 

In order to do this, we must first make sure that all the owners of the property and all the people who signed on the mortgage note are filing bankruptcy. If the property is owned by both spouses, we cannot strip off the mortgage unless both spouses are filing bankruptcy.  In addition, if both spouses signed on the mortgage note (as opposed to the Deed of Trust), we cannot strip off the mortgage unless both spouses file bankruptcy.

 

Next, we must put a value on the real property owned and which secures the mortgage (also known as a Deed of Trust).  The reason for this is that, in order to strip off the mortgage, we have to prove that the real property is not worth more than the payoff balances of the other prior Deeds of Trust.  That is, we need to prove that there is NO value, not even one dollar, left in the real property to secure the Deed of Trust we are trying to get rid of. 

The process is complicated, and may be challenged by the Trustee requiring a hearing before the court.  If you would like to keep your home, and you may have the ability to strip off the second or third mortgage, or if you have other financial difficulties and are contemplating bankruptcy, please call us today to schedule your free bankruptcy consultation.  You can also find more information on our website at www.mcguiregardner.com

Phoenix Bankruptcy Attorney Notes Rise In Bankruptcy Filings

Tuesday, August 4th, 2009

U.S. consumer bankruptcy filings reached 126,434 in July, the highest monthly total since BAPCPA was implemented in October 2005, according to the American Bankruptcy Institute.  The July 2009 consumer filing total, comprised primarily of chapter 7 and chapter 13 bankruptcy filings, represents a 34.3 percent increase from July 2008.  It also reflects an 8.7 percent increase from June 2009.  Rising unemployment combined with pre-existing debt continue to push many families and individuals into bankruptcy. 

If you are facing financial difficulty, or are looking for a bankruptcy attorney in Arizona, please visit our website at www.mcguiregardner.com, or www.bankruptcylawyeraz.com

Arizona Family Law Attorney Discusses Child Support Issues After The Children Are All Adults.

Wednesday, June 3rd, 2009

Many potential clients contact me years after their divorce or paternity case in which they were ordered to pay or receive child support. They may or may not have modified the original child support over the years. However, they have now reached the stage in life where all of the children are over 18 and out of high school. For parents in such a situation, there remains a few questions to ask.

If you are the parent that has been ordered to pay child support, you may still need to go into court to have the Order of Assignment (garnishment of your wages) quashed (eliminated). While technically your ongoing child support obligation ends with the emancipation of your youngest child, your employer may not halt the ongoing garnishment without a court order. Additionally, in many cases there may be a dispute over the specific ending date of your child support obligation. It is often safer to get a court order specifying the termination of your current obligation and ordering the garnishment be halted.

If you are the parent that has been receiving child support, you may still need to act quickly if you are still owed a balance or a child support arrearage. Unpaid child support cannot be collected unless court papers are filed within three years after your youngest child’s 18th birthday. However, failure to obtain a judgment for unpaid child support within three years will result in forfeiture of your claims for unpaid child support.

For more information, please visit our Website.

Possible Deal in the Works on Bankruptcy Cram-Down bill.

Wednesday, April 22nd, 2009

Below is the text of a recent story about the possibility of so-called “cram down” legislation finally making its way through Congress. If the legislation passes it will benefit many homeowners in Arizona who seek bankruptcy protection. The bill would allow a bankruptcy Judge to potentially “cram down” the principal balance on a residence, subject to various limitaitons. The article states:

Wednesday, April 15, 2009
by Bill Swindell

After weeks of negotiation, a compromise may have emerged over Senate legislation that would give bankruptcy judges greater power to modify home mortgages, including reducing the principal. Lenders have been fighting the proposal, arguing that it would bring more uncertainty to the mortgage market and result in higher interest rates. But bank critics say such powers, especially allowing a judge to reduce the principal, are necessary to help homeowners on a wide basis and halt declining prices. The potential deal, according to sources, would add teeth to a House-passed bill that would allow a judge to consider whether the lender has offered the homeowner a new Obama administration plan to help up to 9 million borrowers avoid foreclosure by allowing them to refinance at lower interest rates. The Senate compromise would mandate that if a lender offered a modification through the Obama plan or a program included in last year’s housing bill, called the Hope for Homeowners Act, the homeowner would be ineligible to modify their loan through bankruptcy.

The possible deal has other provisions. At-risk low-income borrowers and those who pay less than 31 percent of their income for mortgage payments would be ineligible for principal reduction, but they could have their rates reduced or their loans amortized over a longer time. If a homeowner opted for a modification under the Obama plan and wound up paying a quarter of income or less for the mortgage, he or she would be ineligible for any bankruptcy modification. If the principal is reduced by a judge, the possible compromise would allow the lender and borrower to evenly split any profit up to the original amount of the loan if it is sold while the homeowner is still in bankruptcy. Only loans that originated before 2009 and amount to less than $729,750 could be modified in bankruptcy. The program would end in 2014.

All sides cautioned that no final deal has been struck and that negotiations could easily fall apart, especially as banks, credit unions and consumer activists each stake out their position in negotiations led by staffers for Senate Majority Whip Durbin. Citigroup Inc. signed on to an earlier compromise, but other lenders have argued that more limitations need to be placed on the availability for principal reduction. Rep. Brad Miller, D-N.C., has said that banks are reluctant to write down such losses through a process known as “cram-down” because it would show up on their already battered mortgage portfolio. “There are a variety of different proposals that are in writing. Nothing has been agreed to,” said Durbin spokesman Max Gleischman. “We were exactly at the same place we were at last week.” The measure is likely to be combined with other banking provisions, including lifting the cap on the number of business loans that credit unions can make. It would also likely expand eligibility for Hope for Homeowners and increase the FDIC’s borrowing authority up to $500 billion for a limited time to give the agency resources to address the banking sector’s problems. The FDIC language would allow the agency to lower fee assessments that it had recently increased on banks to handle the rise in failing institutions. One source said the banks believe that whatever they may lose via the expanded bankruptcy process could be made up through the lower fee assessment. Another source said the banks made the offer to Durbin and felt that he would likely accept the language.

Follow the blog to keep up to date on this pending legislation. You can also visit ourwebsite to learn more about loan modificaiton and bankruptcy.

ARIZONA DIVORCE ATTORNEY DISCUSSES ALTERNATIVES TO TRADITIONAL DIVORCE:

Wednesday, April 22nd, 2009

  Under Arizona law, a marriage may be ended through a dissolution (divorce) or an annulment.  Another alternative occasionally used is a legal separation. 

 

            Each of these methods have much in common.  For example, in a divorce, annulment, or legal separation, the Judge must equitably divide any community property and community debts.  The Judge must make a determination of any custody and child support issues.  In a divorce or a legal separation (but not in an annulment), the court must make a determination on the issue of spousal maintenance.

 

            To obtain an annulment, a party must demonstrate that factors exist that renders the marriage void.  This may be demonstrated by showing that one of the parties was already married.  This is also demonstrated by showing significant fraud or misrepresentation prior to the marriage.  Such a showing of fault is not necessary in a divorce or legal separation.  Arizona is a no-fault divorce state, meaning that neither side must prove any specific wrong-doing by the other party to proceed with a divorce.  To obtain a divorce, all that must be shown is that one or more of the spouses believes that the marriage is irretrievably broken.  For a legal separation, a party  may demonstrate that the marriage is irretrievably broken, or simply that the parties desire to live separate and apart.

 

            Annulments are often sought after a very short term marriage, or when it is later discovered that one of the parties was still married when the parties were married.  One strategic benefit for seeking an annulment is when one party wishes to avoid paying spousal maintenance (alimony), as the Court cannot do so in an annulment case.  With an annulment, the Court retroactively eliminates the marriage, as if it never occurred.

 

            Legal separations are typically sought for religious or financial reasons.  Some individuals have religious beliefs against a divorce, and therefore prefer to become financially separated rather than divorced.  Because they are not divorced, neither party can remarry.  There may be financial advantages for a legal separation also.  For example, legally separated couples may still file taxes jointly, and may still include the spouse on medical insurance. 

 

            Ultimately, each case must be individually analyzed by an Arizona Attorney experienced in divorce and family law.  While most cases proceed with a standard dissolution (divorce), there may be some advantages to exploring these other legal options.

For more information, please visit our Website.

ARIZONA FAMILY LAW ATTORNEY DISCUSSES NEED FOR ATTORNEY IN UNCONTESTED DIVORCE CASES:

Thursday, April 16th, 2009

I am often asked in divorce consultations if an attorney is really needed if the parties believe that their divorce case or legal separation case will be uncontested. Generally, it is advantageous to both parties to have an attorney involved even in uncontested cases. Furthermore, many cases that initially appear to be uncontested still require extensive negotiations on the specific agreement detail, and in a small percentage of cases, the parties are unable to maintain the agreement as one or both parties back out for an assortment of reasons.

Because of ethics issues and the conflict of interest, one attorney cannot represent both husband and wife in a case, even if it is uncontested. However, having at least one attorney involved from the beginning of the case, representing either party, provides the benefit to both parties of having the appropriate legal requirements in the pleadings filed with the court to commence the case.

Generally, uncontested divorces are resolved by having both parties and any attorneys involved sign settlement documents. These settlement documents would include a Consent Decree in all cases, and in certain cases would include a Stipulated Parenting Plan and/or a Property Settlement Agreement. Having an attorney involved in the drafting of these settlement documents ensures that the documents are properly prepared, contain the necessary legal requirements, and facilitates placing the agreement of the parties into the proper legal wording. Furthermore, experienced divorce attorneys have the benefit of hundreds of prior divorces and understand various issues that are likely to go wrong. With this knowledge, the settlement documents can be prepared in such a way to address various contingencies and potential future problems, thus avoiding future litigation between the parties.

Finally, an attorney involved in your divorce case will provide you with the knowledge of maneuvering through the court system, and can often facilitate an uncontested divorce without either party being required to appear in court at any time.

If your spouse has hired an attorney, and that attorney is preparing the pleadings and settlement documents, that attorney should inform you that he cannot represent you because he/she represents your spouse. That attorney should inform you that you have the right to hire your own attorney, and that you may take any documents to your own attorney for review prior to signing any settlement documents. Because experienced divorce attorneys have advanced legal training, years of experience, hundreds of divorce and family law cases behind them, it would be wise to hire your own attorney to represent you in the case. At a minimum you should have your own attorney review any settlement documents with you prior to signing them. Your attorney can point out potential pitfalls, discuss with you likely outcomes if your case were to proceed to trial, ensure that you understand your legal rights, and discuss with you how close the agreed upon provisions approximate what a court would likely decide if your case went to trial. Having this knowledge provides you with the assurances that the settlement documents are fair and equitable and in your children’s best interest before you sign them, or provides you an out if these settlement documents are not as fair and equitable as you previously believed.

If you are faced with a divorce, legal separation, or custody case, please call me today for a free initial telephone consultation to discuss how hiring an attorney will benefit you in your family law case.

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