The Interplay Between Bankruptcy and Divorce Law in Virginia

Which courts hear bankruptcy and family law matters in Virginia?

Virginia lawyers and judges use the term jurisdiction to describe the power of a court to hear and decide a particular matter concerning a particular person or thing.  Venue is used to describe the most appropriate or convenient court in Virginia to hear a particular matter, usually from a number of different possible courts with jurisdiction.  In the Richmond, Virginia area, the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division, has jurisdiction and venue over bankruptcy cases when the debtor’s domicile, residence, principal place of business or principal principal assets were located, for the greater portion of the preceding 180 days in cities of Richmond, Colonial Heights, Emporia, Fredericksburg, Hopewell, or Petersburg, or the counties of Amelia, Brunswick, Caroline, Charles City, Chesterfield, Dinwiddie, Essex, Goochland, Greensville, Hanover, Henrico, King and Queen, King George, King William, Lancaster, Lunenburg, Mecklenburg, Middlesex, New Kent, Northumberland, Nottoway, Powhatan, Prince Edward, Prince George, Richmond County, Spotsylvania, Surry, Sussex or Westmoreland.

Bankruptcy concerns both federal and state law while family law is predominantly state law.  Congress was given the power to establish “uniform Laws on the subject of Bankruptcies throughout the United States;..” in Article I, Section 8 [4] of the U.S. Constitution.  In Section 151 of Title 28 of the U.S. Code, bankruptcy courts and judges are made a part of the U.S. District Court system. http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t26t28+2766+1++%28%29%20%20AND%20%28%2828%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20w%2F10%20%28151%29%29%3ACITE%20%20%20%20%20%20%20%20%20 .  The Bankruptcy Code is contained in Title 11 of the U.S. Code.  The power of the Bankruptcy Courts is defined in Section 105 of Title 11, which include the broad-reaching, equitable power to “issue any order, process, or judgment that is necessary or appropriate to carry out the provisions of [Title 11 of the U.S. Code]”.  http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000105—-000-.html .  By virtue of a standing order entered in the U.S. District Court for the Eastern District of Virginia, bankruptcy related matters have been referred to the bankruptcy judges in this district. http://www.vaeb.uscourts.gov/orders/edva/081584%20Order.pdf   As discussed in answer to the question, “What kind of property can a husband or wife protect in bankruptcy?”, http://bankruptcydivorceblawg.com/?page_id=276 , Virginia has “opted out” of the property protections or exemptions provided in the Bankruptcy Code, so Virginia residents use the Virginia state law exemptions, along with various non-Bankruptcy Code federal exemptions, to protect property in bankruptcy.  Thus, bankruptcies in Virginia are concerned with Virginia property law, and Virginia divorce or family law.

The Virginia Circuit Courts have exclusive, original jurisdiction over divorces and related matters, including spousal support and maintenance, child support, child custody, child visitation, and equitable distribution, the process of dividing up marital property and marital debt.  Most of the Virginia statutes concerning domestic relations, marriage and divorce are contained in Title 20 of the Virginia Code. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+TOC2000000  The Virginia Juvenile and Domestic Relations District Courts share jurisdiction with the Circuit Courts over certain family law matters, including child custody, child visitation, child support, spousal support or maintenance, as defined in Section 241 of Title 16.1 of the Code of Virginia, but not over divorce or equitable distribution.  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+16.1-241 .

You should consult with a Virginia bankruptcy or family law lawyer to discuss which court is the proper court to hear your legal matter.

Will a court reduce husband’s spousal support due to changes in the economy and the real estate market?

In an unpublished opinion, the Virginia Court of Appeals upheld the Circuit Court’s denial of a reduction in the case of Lane v. Lane, Record No. 0951-09-4 (September 15, 2009) http://www.courts.state.va.us/opinions/opncavwp/0951094.pdf . The husband and wife were married for twenty-four years before separating. At the time the parties entered into a separation agreement, husband was a CEO of a company and made more than half a million a year in salary.  In the separation agreement, the husband agreed to pay to wife $6,000 a month in spousal support with the following condition:

“[Wife] agrees to make a good faith effort to obtain a job so that she may become more financially self-sufficient. If [husband]’s income is reduced substantially through no voluntary act on his part, the amount of spousal support to be paid shall be subject to renegotiation and modification within six weeks of such a reduction. If [husband] and [wife] are unable to agree as to the amount of support to be paid, then they agree to return to mediation in an attempt to resolve these issues before taking any legal action.”

The separation agreement was incorporated into the final decree of divorce.  Three years after the date of the property settlement agreement, husband’s company was bought by another company.  The husband began investing in real estate projects and the stock market.  With the onset of the recession in 2007 and 2008, husband experienced a substantial reduction in his income.

After the divorce, the wife became a real estate agent in an attempt to become self-sufficient.  After she was diagnosed with cancer four years later, wife exited the real estate business.

The husband made a motion to reduce his spousal support obligation in the Virginia Circuit Court.  The divorce court judge found the necessary material change in circumstances to modify support, but held that the involuntary change in husband’s income did not warrant a reduction in spousal support.   The trial court also held that wife had made a good faith effort to obtain employment and income.  The husband appealed the judge’s denial of his motion to reduce spousal support.

The Virginia Court of Appeals first restated its standard of review, that it would not disturb a trial court’s decision where it is based on an ore tenus hearing, unless it is ‘plainly wrong or without evidence in the record to support it.  Citing Virginia Code Section 20-109(C), the court recognized that it’s authority was limited by the stipulation or contract between the parties  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-109 . In this case, the separation agreement provided for a reduction in support when husband’s income decreased through no fault of his own.  A party moving for a reduction in spousal support must prove both a material change in circumstances and that the change justifies a reduction in support.  The material change must relate to the ability of the spouse paying support to pay or the needs of the spouse receiving support.  Here, although the husband had prudently decided to invest in the stock market and was not required to use his investments for support, the husband was in good health, had better earning capacity than wife, and had enjoyed a higher standard of living than during the marriage.  The divorce court judge found that wife had a greater need for support due to her health and the husband was not less able to provide support to her.  Consequently, although there had been a material change in circumstances, that change did not justify a modification of support.  The trial court’s ruling that wife had made a good faith effort to secure employment was supported by the evidence.  The Virginia Court of Appeals recognized that the trial court judge, as fact finder, properly ascertained wife’s credibility, determined the weight to be given to her testimony, and had the discretion to accept or reject any of the wife’s testimony.  The court declined to award either appellant or appellee attorney’s fees and costs.

You should consult with your divorce lawyer to discuss whether the consequences of the current recession justify a modification of a support obligation in your case.

How should an income tax refund from a joint tax return be divided between a husband and wife in a Virginia bankruptcy case?

In the case of In re: Lyall, 191 B.R. 78 (E.D. Va., 1996), the U.S. District Court for the Eastern District of Virginia ruled that the tax refund had to be divided in proportion to each spouse’s withholding rather than divided equally or divided in proportion to each spouse’s percentage of the total income.  http://scholar.google.com/scholar_case?case=12729701313817348780&q=In+re:+Lyall&hl=en&as_sdt=80000000000003 .  The husband had filed a chapter 7 bankruptcy case in the Eastern District of Virginia Bankruptcy Court without his wife.  In the bankruptcy case, the Debtor husband listed on his Schedule B, as part of the property of the estate under Section 541 of Title 11, the Bankruptcy Code, http://www.law.cornell.edu/uscode/html/uscode11/usc_sec_11_00000541—-000-.html , a tax refund, which the husband claimed as exempt on Schedule C under the Virginia Homestead Exemption found in Section 34-4 of the Code of Virginia, http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-4 .   A creditor objected the husband’s claimed exemption of the tax refund.  Although most of the couple’s income had been derived from the husband’s withholdings, the bankruptcy court judge ruled that the husband and wife were each entitled to 50% of the tax refund, based on the case of Bass v. Hall, 79 B.R. 653 (Bankr., W.D. Va., 1987) http://scholar.google.com/scholar_case?case=8582857943146304269&q=In+re:+Lyall&hl=en&as_sdt=80000000000003 .   

On appeal, the United States District Court for the Eastern District of Virginia disagreed.  The court recognized that there were three positions across the county: a majority position which held that the tax refund should be allocated proportionally according to each spouse withholding in the relevant year, a position that the tax refund should be allocated equally without regard to income or withholding, and a position that the refund should be allocated in proportion to each spouse’s income produced.  The court agreed with the majority position on the grounds that the income withheld would have been the husband’s property if the withholding amount were correct, and the husband could not have transferred that amount of income to the wife before filing because that transfer could be set aside as a fraudulent transfer.  The court recognized the well-established law that the filing of a tax return does not alter the property rights between the spouses, citing In re: Wetteroff, 453 F.2d 554 (8^th Cir, 1972), http://scholar.google.com/scholar_case?case=2785059336103572556&q=In+re:+Lyall&hl=en&as_sdt=80000000000003 .

You should consult with your Virginia bankruptcy lawyer concerning your property rights in a tax refund from a joint tax return with your husband or wife.

Must a wife file a complaint objecting to the dischargeability of a domestic support obligation in husband’s chapter 7 bankruptcy case in Virginia?

No, the spouse does not have to file a complaint objecting to the dischargeability of a domestic support obligation in his or her spouse’s chapter 7 bankruptcy case.  Domestic support obligations are automatically nondischargeable in bankruptcy and both the federal and state courts have jurisdiction over cases involving the dischargeability of a family law debt.  In the greater Richmond metropolitan area, this means this issue of the dischargeability of a particular debt related to a separation or divorce, or support, in bankruptcy may be decided in the Virginia Circuit Courts or Juvenile and Domestic Relations District Court for Chesterfield County, Hanover County, Henrico County or the City of Richmond, or the U.S. Bankruptcy Court for the Eastern District of Virginia, Richmond Division.

Under Section 523 of the Bankruptcy Code, certain debts are not dischargeable in bankruptcy.  http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t09t12+3806+0++%28%29%20%20AND%20%28%2811%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20w%2F10%20%28523%29%29%3ACITE%20%20%20%20%20%20%20%20%20 .  The types of debts that may be automatically nondischargeable include certain types of taxes or customs duties; domestic support obligations; certain fines, penalties or forfeitures owed to the government; most student loans; personal injury or wrongful death caused by operating a vehicle while intoxicated; a debt that was or could have been listed in a prior case in which the debtor waived, or was denied, a discharge; a judgment, order or decree concerning fraud or defalcation as a fiduciary of a federally insured depository or credit union; a malicious or reckless failure to fulfill a commitment to a  Federal depository institutions regulatory agency to maintain capital; criminal restitution under Title 18 of the U.S. Code; a debt incurred to pay a nondischargeable tax to the U.S. or other governmental unit; fines or penalties imposed under Federal election law; certain family law debts that are not Domestic Support Obligations; certain post-petition homeowner or condominium association dues; fees, costs and expense on a prisoner for filing a case, motion, complaint or appeal; debt owed to certain retirement plans; and certain violations of Federal securities law.  Several types of debts are only potentially nondischargeable;  these debts will be discharged unless the creditor files a complaint or adversary proceeding within sixty (60) days following the date first set for the meeting of creditors objecting to the discharge of a debt based on fraud, false pretenses, use of a false financial statement in writing; fraud or defalcation while acting in a fiduciary capacity, embezzlement or larceny; or wilfull and malicious injury by the debtor to another entity or the property of another entity.

Domestic support obligations and family law debts that are not domestic support obligations do not require the filing of a complaint within a certain time period for the debts to be nondischargeable.  As answered in the question, “Can My Spouse Discharge a Family Law Debt in Bankruptcy?”, http://bankruptcydivorceblawg.com/?page_id=23 , while domestic support obligations are nondischargeable in all bankruptcies, family law debts that are not domestic support obligations may be discharged in a chapter 13 case, but not in a chapter 7 case.

You should consult with your Virginia bankruptcy or divorce lawyer concerning the dischargeability of family law debts in bankruptcy.

What kind of property can a husband or wife protect in bankruptcy?

Both federal and state laws allow a husband or wife, living together or separated, to protect certain property from creditors.  The protected property may automatically be, or can become, exempt from creditor collection process.  Consequently, these laws are known as exemptions and the property is called exempt property.  As explained below, a divorce can affect the property that can be protected from creditors, in or out of bankruptcy.

Bankruptcy law is concerned with both federal and state law, and the conflict between the two.  The bankruptcy code itself is federal law.  The bankruptcy courts are part of the federal court system, with appeals to the U.S. District Court.  Family law and property law are largely state law.  The bankruptcy code respects this division between federal and state law by allowing each state to provide its citizens with state law exemptions in bankruptcy, or the use of the federal bankruptcy exemptions, or the choice to use either.  Those states that do not allow their citizens to use the federal bankruptcy exemptions, like the Commonwealth of Virginia, are said to have “opted out” of the federal bankruptcy exemptions contained in Section 522(d) of the Bankruptcy Code.  http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t09t12+3805+0++%28%29%20%20AND%20%28%2811%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20w%2F10%20%28522%29%29%3ACITE%20%20%20%20%20%20%20%20%20 .  Section 34-3.1 is the “opt-out” statute which restricts the use of the bankruptcy exemptions in Virginia. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-3.1 .

Prior to enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in October 2005, it was possible for a person contemplating bankruptcy to choose to reside in a state with generous exemptions, especially a state with a generous homestead exemption like Florida or Texas.  The person contemplating bankruptcy could protect assets by buying an expensive home that was protected under state law.

Section 522 attempts to eliminate such forum shopping by introducing a look back period into a person’s right to claim exemptions.  Domicile is a person’s legal home, where he or she permanently resides, while residence is a person’s physical location.  A person’s domicile is where a person intends to reside for the indefinite future.  Under Section 522(b)(3)(A), the debtor’s domicile for the 730 day period immediately preceding the filing of the bankruptcy determines the state law that applies to the debtor’s case.  If the debtor has more than one domicile during the 730 day period, then the domicile which occupied the greater portion of the 180 day period prior to the 730 period will determine which state’s laws are applicable.

A husband or wife who was domiciled in Virginia during the relevant period can use various Virginia state law exemptions and certain non-bankruptcy federal exemptions, the tenancy by the entirety with the common-law right of survivorship to protect real estate, and federal bankruptcy exemptions protecting certain retirement funds, including 401(k)s and IRAs within limits.  Most of the Virginia state law exemptions are contained in Title 34 of the Code of Virginia, including the homestead exemption in Section 34-4  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-4 and the poor debtor’s exemptions in Section 34-26 http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-26   A handy reference guide to the federal and Virginia exemptions is found in the official court form “Request for Hearing – Notice of Exemption Claimed” made available to judgment debtors subject to creditor process in Virginia, on the Virginia court’s website at http://www.courts.state.va.us/forms/district/dc407.pdf , which lists the following exemptions:  Social Security benefits and Supplemental Security Income at 42 U.S.C. Section 407 http://www.law.cornell.edu/uscode/html/uscode42/usc_sec_42_00000407—-000-.html ; Veteran’s benefits at 38 U.S.C. Section 5301 http://www.law.cornell.edu/uscode/html/uscode38/usc_sec_38_00005301—-000-.html ;  Federal Civil Service retirement benefits at 5 U.S.C. Section 8346  http://www.law.cornell.edu/uscode/html/uscode05/usc_sec_05_00008346—-000-.html ; Annuities to survivors of federal judges at 28 U.S.C. 376(n) http://www.law.cornell.edu/uscode/html/uscode28/usc_sec_28_00000376—-000-.html ; Longshoreman and Harborworkers Compensation Act at 33 U.S.C. Section 916 http://www.law.cornell.edu/uscode/html/uscode33/usc_sec_33_00000916—-000-.html ; Black lung benefits at 30 U.S.C. Sections 931 http://www.law.cornell.edu/uscode/html/uscode30/usc_sec_30_00000931—-000-.html  and 932 http://www.law.cornell.edu/uscode/html/uscode30/usc_sec_30_00000932—-000-.html ; Seaman, master, or fisherman’s wages, except for child or spousal support and maintenance at 46 U.S.C.A. Section 11109 http://www.law.cornell.edu/uscode/html/uscode46/usc_sec_46_00011109—-000-.html ; Unemployment compensation benefits at Section 60.2-600 of the Code of Virginia http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+60.2-600 ; portion of wages not subject to garnishment in Section 34-29 of the Virginia Code http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-29 ; public assistance payments in Section 63.2-506 of the Code of Virginia http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+63.2-506 ; the homestead exemption and the additional exemptions for dependents, older residents and disabled veterans at Section 34-4.1 of the Code of Virginia http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-4.1 ;  the poor debtor’s exemptions and agricultural exemptions in Section 34-27 of the Virginia Code http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-27 ; worker’s compensation in Section 65.2-531 of the Code of Virginia  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+65.2-531 ;  growing crops in Section 8.01-489 of the Code of Virginia http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-489 ; benefits from group life insurance policies in Section 38.2-3339 of the Virginia Code  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+38.2-3339 ; proceeds from industrial sick benefits insurance in Section 38.2-3549 http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+38.2-3549 ; assignments of certain salary and wages in Section 55-165 of the Code of Virginia http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-165 ; pre-need funeral contracts at Section 54.1-2823 of the Virginia Code http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+54.1-2823 ; benefits for victims of crime at Section 19.2-368.12 of the Code of Virginia http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+19.2-368.12 ;  and certain retirement benefits at Section 34-34  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+34-34 ;

In a family law case, you should check with a Virginia bankruptcy or family law lawyer to determine if these exemptions apply to support or alimony protected under federal law at 42 U.S.C. Section 659 http://www.law.cornell.edu/uscode/html/uscode42/usc_sec_42_00000659—-000-.html

As discussed in answer to the question, “Is my real estate vulnerable to creditors when I divorce?”, http://bankruptcydivorceblawg.com/?page_id=43 a divorce terminates the survivorship in the tenancy by the entirety, exposing real property to the claims of either spouse.

You should consult with your Virginia bankruptcy attorney to determine what property will be protected if you should file bankruptcy in Virginia.

Can payments on an expensive home and BMWs be used to determine the disposable income of an above-median debtor in chapter 13 bankruptcy?

Yes, in the case of George Pryor Faison, II, 416 B.R. 227 (Bkr. E.D.Va., 2008), in the Eastern District of Virginia, Richmond Division,  http://scholar.google.com/scholar_case?case=16150682234054747999&q=In+re:+George+Faison&hl=en&as_sdt=80000000000002 , the bankruptcy judge held that the disposable income of an above-median-income debtor can be determined using the monthly income resulting from Official Form B22C, the means testing form, minus the expenses allowed by 11 U.S.C. 707(b)(2)(A)(iii) http://uscode.house.gov/uscode-cgi/fastweb.exe?getdoc+uscview+t09t12+3843+0++%28%29%20%20AND%20%28%2811%29%20ADJ%20USC%29%3ACITE%20AND%20%28USC%20w%2F10%20%28707%29%29%3ACITE%20%20%20%20%20%20%20%20%20 , including payments on a luxury goods, like BMWs, and an expensive, $700K home, even if such payments were at the expense of the unsecured creditors, who were only receiving a 3% dividend.  Bankruptcy attorney James H. Wilson, Jr., successfully defended against the unsecured creditor’s objections to confirmation of the chapter 13 plan based on failure to meet the liquidation test and the good faith test.  Although the bankruptcy judge sustained the objection to confirmation based on underfunding, this objection could be overcome by increasing the funding, which was done in a modified plan.

 Although this case does not directly concern a divorce, the same issue may be applicable to separated or divorcing spouses.

May accrued rent of the former marital residence kept by husband be treated as waste of a joint asset in equitable distribution proceedings in Virginia?

In the Virginia Circuit Court case of Penza v. Penza, Case No: CL07-92, in the Circuit Court of Rappahannock County, the divorce court judge held that the accrued rent that was kept by the husband, who was not occupying the property and did not intend to retain it, was waste of a joint asset.

The parties were married for approximately seventeen years.  The husband was the primary breadwinner, earning a substantial income, while wife was a stay at home mom.  Most of the evidence was received by the judge from wife’s divorce lawyer, as husband had represented himself and not well.   The Virginia judge recognized the wife’s attorney for providing the documentation and organizing the material effectively to support a decision. The most valuable asset of the parties was the former marital residence, a single family house valued at $525,000 at the time of the equitable distribution hearing in the divorce case, with a mortgage of $267,000, leaving marital equity of $258,000.  After the parties separated, husband left the marital residence and rented it out to tenants.  The husband collected rent from the property, but did not pay the mortgage, as ordered by the divorce court judge at the pendente lite hearing.  Neither party listed the accrued rent on their schedules of assets.  At the conclusion of the Virginia divorce case, the judge took the matters of equitable distribution, spousal support, child support, and attorney’s fees under advisement, meaning the judge took the matters under consideration, without giving an immediate decision.

In his written opinion, the judge directed that the former marital residence be sold with the equity divided equally between the husband and wife.  If the parties could not agree on a real estate broker, the court appointed a special commissioner of sale to list the property with a broker.  The judge provided that any sales contract would have to be approved by the court.  If the property did not sell within six months, then it would be sold at auction.  The husband was ordered to pay half of the accrued rent in the amount of $10,500 to wife.  All future rents were to be paid to the wife, to be received by her until half the accrued rent was repaid.  Upon full repayment, the wife would then send half the rent each month to husband.

With regard to the personal property, the court ordered that the husband and wife conduct an auction between themselves of all the personal property.  The court would determine the net difference between the sums bid, and divide those equally between the parties, with the parties receiving the items of property after the bidded sums were paid.

With regard to spousal and child support, the Virginia divorce court found that the husband’s monthly income was $18,500, of which he was ordered to pay $4,600 per month to wife as spousal support for seven years, to be reduced by 50% absent a material change in circumstances.  The husband was not required to provide health insurance to wife upon entry of the divorce decree.  The husband was ordered to pay $2,062 a month in child support to wife, with a credit for required health insurance coverage for the two children.

Finally, the husband was ordered to pay $20,500 of wife’s attorney’s fees, within six months.  The divorce court judge recognized that wife’s attorney provided much of the documentation in the case and organized the presentation of the case in an effective manner.

You should consult with your Virginia divorce lawyer regarding the treatment of rent from the marital residence in equitable distribution.

Can a divorced lawyer husband reduce spousal support in Virginia to his ex-wife upon his self-employment?

In the unpublished case of Amberly v. Amberly, Record No. 1783-09-4, (Va. App., February 2, 2010, the Virginia Court of Appeals upheld the trial court judge denial of the attorney husband’s motion to modify support and award to wife of her attorney’s fees. http://www.courts.state.va.us/opinions/opncavwp/1783094.pdf .

Husband was an attorney working in trademark and patent litigation, making approximately $100,000 a year.  When the husband and wife divorced in Virginia, the divorce court judge ordered husband to pay $2,200 a month in spousal support to wife for fifteen years.  Husband was concerned about losing his job and starting looking for employment.  When husband could not find a job, he started his own firm as a self-employed attorney-at-law.  The lawyer husband filed a motion in the Virginia Circuit Court to modify his spousal support obligation due to his self-employment.  During the three and a half months prior to the hearing on modifying support, husband earned approximately $1,300 a month from his self-employment as a lawyer and paid no support to his wife.  The divorce court denied the husband’s motion to modify spousal support and ordered husband to pay $10,000 in attorney’s fees to wife for defending the motion.  The husband appealed.

The Virginia Court of Appeals reviewed the law applicable to the case.  Under Section 20-109 of the Code of Virginia, a party may modify the amount or duration of an order for spousal support or maintenance as the circumstances may make proper.  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-109 .  The party asking for a modification of support must prove a material change in circumstances and that this change warrants a modification in support.  The material change must bear upon the financial needs of the dependent spouse or the ability of the supporting spouse to pay.  Street v. Street,  25 Va. App. 380, 488 S.E.2d 665 (1997)  http://www.courts.state.va.us/opinions/opncavwp/2363954.pdf .  The trial court has the discretion to determine whether a spouse is entitled to a modification of support, and that determination will not be overturned unless it is clearly unjust.

In this case, the lawyer husband introduced only his own testimony that he was involuntarily unemployed, with little documentary support or other witnesses.  In addition, the attorney husband had failed to pay his court ordered support even before he lost his job.  The trial court judge had noted that the husband made his motion to modify support only a year after the final hearing in the divorce case.  On top of that, the judge doubted the credibility and completeness of the husband’s presentation concerning his reduction in income.  Consequently, the trial court judge found that the reduction in husband’s income was his own fault, and not a material change in circumstances since the last support order.

The Virginia Court of Appeals found no error in the trial court judge’s fact findings or application of the law.  Although there was some evidence that wife’s income had increased, the court restated the rule that not every material change in circumstances justifies a modification of support, citing Blackburn v. Michael, 30 Va. App. 95, 515 S.E.2d 780 (1999). http://www.courts.state.va.us/opinions/opncavwp/0259983.pdf .  Further, the Virginia Court of Appeals did not find an abuse of discretion in the trial court’s award of $10,000 in attorney’s fees to wife, as she incurred more than three times that amount in defending the motion while husband represented himself pro se and husband had offered little documentary evidence of his financial condition.

You should consult with your Virginia divorce lawyer concerning whether spousal support may be modified in your circumstances.

Is a domain name bought by husband in a bankruptcy proceeding marital property subject to equitable distribution in a Virginia divorce?

Yes, the proceeds of the sale of the domain name are marital property, even though the domain name was purchased by husband and the proceeds were deposited into an account in his sole name during the marriage.  In Kirkendale v. Kirkendale, Loudoun County Circuit Court Case No: 53171 (January 13, 2010), the husband filed for divorce based on constructive desertion.  The wife filed a cross-complaint based on cruelty and/or constructive desertion.  During the two day, fully contested, divorce trial, the husband amended his complaint, as permitted under Section 20-121.02 of the Code of Virginia, to a divorce based on having lived separate and apart without cohabitation and without interruption for one year. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-121.02 .   The judge granted a divorce to the husband on this no-fault basis.

During the marriage, husband had bought the domain name “choice.com” for $6,500 during a bankruptcy proceeding of the previous owner.  Five years later, after the husband and wife separated, husband sold it for $175,000.  The proceeds were deposited into a money market account in husband’s name.  At the time of the equitable distribution hearing, the balance in the account was approximately $50,000.  Although counsel for the wife had filed a motion for an alternate valuation date as permitted by Virginia Code Section 20-107.3 twenty-one days in advance of the evidentiary hearing, http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-107.3 , the motion was never argued at the equitable distribution hearing, and the divorce court judge found that wife had waived her request.  Furthermore, the judge held that the wife did not make an argument of waste, that is, that husband had dissipated marital funds in anticipation of separation or divorce or after the date of last separation of the parties.  After considering the equitable distribution factors, the judge divided the remaining proceeds equally, awarding wife a monetary award of $25,000.

The husband offered evidence on four credit card accounts of the parties, which evidence was not rebutted by the wife.  The wife received checks from her sister totaling some $32,000 to cover the parties’ living expenses.  The judge found these debts to be marital debt, but the majority of these debts were time barred from enforcement by the applicable three year statute of limitations for an oral contract found in Section 8.01-246(4). http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+8.01-246 .   Consequently, the divorce court judge found that there was only $4,500 of marital debt still owed to wife’s sister.  The judge held the husband was responsible for his business loan and a loan secured by his motorcycle and equally divided the remainder of the debt, which consisted of unpaid taxes, credit card bills, and the debts to the sister, 50% to husband and 50% to wife.

With regard to custody, the parties had previously agreed to joint legal custody of their three children with primary physical custody to the husband father.  At trial, the husband opposed joint legal custody because he believed it would limit his choice of daycare providers.  The wife opposed the husband’s choice of daycare provider, who was the daughter of his girlfriend.  There was no evidence of any harm to the children by this choice.  The court continued joint legal custody, but ruled that the parties did not have to agree on the daycare provider, allowing husband to choose.  The divorce court judge further ruled that the custodial parent had inherent authority to select the daycare provider while that parent has custody, is working, and is paying for the daycare.

With regard to spousal support, the judge considered the factors in Section 20-107.1, which it noted are very similar to the equitable distribution factors, and awarded wife a permanent spousal support award of $2,500 a month for three years. http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-107.1 .

The husband was awarded child support of approximately $450 a month according to the sole custody guidelines, as wife had less than 90 days a year of visitation.  Each party had to bear his or her own attorney’s fees of $16,500 to husband and $30,000 to wife.

You should consult with a Virginia divorce lawyer to discuss whether particular proceeds of property are marital, separate or hybrid property subject to equitable distribution.

Is husband’s refusal to pay for health insurance under a separation agreement after wife remarries contempt of court in Virginia?

The Virginia Court of Appeals in the case of McCoy v. McCoy, No. 3087-08-3 (January 12, 2009) http://www.courts.state.va.us/opinions/opncavwp/3087083.pdf , upheld the trial court’s decision that the husband’s refusal to pay for health insurance under a separation agreement after the wife remarried was in contempt of the court’s order.

The husband and wife entered into a separation agreement or property settlement agreement with a number of different sections.  In one section, there was a mutual waiver of spousal support by the parties, with a condition to wife’s waiver that husband perform all his obligations under the agreement and a provision that the husband could not discharge his obligations in bankruptcy.  In another section, husband assumed responsibility for the payment of certain debts, including the mortgage.  In still another section, husband agreed to maintain health insurance coverage for the wife until she obtained employment offering comparable insurance.

The husband and wife were divorced in Virginia and the separation agreement was incorporated into the final decree of divorce.  Five years later, the husband stopping paying for the wife’s health insurance coverage.  The wife paid the premiums to maintain coverage and remarried approximately a year and half later.  The wife filed a motion to show cause against the husband for failure to provide health insurance.  The Virginia divorce court judge held that the health insurance was not spousal support which would terminate upon wife’s remarriage and that husband was in contempt of court for failing to cover wife.  The husband was sentenced to six months in jail, the imposition of which was suspended by the divorce court judge to give husband the opportunity to purge himself of contempt by paying wife back for the premiums she paid, providing health insurance for wife again, and paying for wife’s attorney’s fees and costs.  The husband appealed this contempt order and moved the court to vacate its order.  The trial judge subsequently granted husband’s motion to vacate its order.

The Virginia Court of Appeals first noted that the trial court lacked jurisdiction, or the power to decide, to vacate its order once husband filed an appeal.  The court also noted that both parties (and the trial court) found the separation agreement was unambiguous, but disagreed on its meaning.  The Virginia Court of Appeals agreed with wife’s interpretation of the separation agreement that health insurance was not spousal support terminated by her remarriage because it was in a different section than spousal support with several sections in between, and because health insurance coverage was due immediately upon signing the agreement, unlike spousal support which only became due if husband breached the agreement or filed bankruptcy.  Although a divorce court judge could not unilaterally order a husband to provide health insurance coverage to his wife upon divorce under Section 20-107.1 http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-107.1 or Section 20-107.3 http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-107.3 of the Code of Virginia, in this case, the parties had agreed to coverage in a property settlement agreement.  The Court of Appeals recognized that a divorce court judge is required to give effect to the terms of a valid separation agreement or property settlement agreement between the parties under Section 20-109.1 of the Code of Virginia:  http://leg1.state.va.us/cgibin/legp504.exe?000+cod+20-109.1 .  Since the husband’s obligation to maintain health insurance on his wife was not spousal support, it did not terminate upon her remarriage under Section 20-109 of the Code of Virginia:  http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+20-109 .

You should consult with your Virginia divorce lawyer regarding how to structure your separation agreement or property settlement agreement in accordance with your wishes.