Bankruptcy

As it relates to individuals considering bankruptcy the two most frequently used types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 provides for the liquidation of assets to satisfy debts owed. All nonexempt assets are gathered by a trustee and sold to pay off debts. Certain assets may be exempted from liquidation depending on federal or state laws. The individual filing for Chapter 7 bankruptcy will need to include a schedule of exempt property with their bankruptcy petition. Most Chapter 7 bankruptcies involve a situation where all the property of the individual is exempt or there are no assets. In that scenario, the trustee makes a report to the court that there are “no assets” for liquidation and no distribution is made to creditors.

Chapter 13 allows an individual to keep their property and provides a three to five year time frame to make payments. This plan is available to individuals with regular income to support the payments. The length of the term for repayment is based on the income of the individual with the longer term being reserved for individuals earning less or demonstrating other “cause” for extension. The benefit of Chapter 13 is the individual is able to retain their property, and potentially have a longer period for repayment and lower monthly payments over the term. Payments are made to a trustee and then the trustee is responsible for distribution to creditors. Both types of bankruptcy generally result in a stay meaning attempts at debt collection stop. Bankruptcy will affect your credit and will be reflected on your credit report for seven to ten years however it may be the best route to a fresh financial start if truly plagued with debt.

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Elective Share

It is possible for a spouse intentionally left out of the other spouse’s will to still receive a share of the estate in the event of death. Pennsylvania law provides for an “elective share” pursuant to 20 Pa. C.S. 2203(a). This law provides that if a person is still married at the time of their death with no divorce pending, the surviving spouse can elect to receive 1/3 of that person’s estate. There are items that are excluded from the estate instances where an elective share will be applied. 2203(b) states the following exceptions: (1) any conveyance made with the express consent or joinder of the surviving spouse; (2) the proceeds of insurance, including accidental death benefits, on the life of the decedent; (3) interests under any broad-based nondiscriminatory pension, profit sharing, stock bonus, deferred compensation, disability, death benefit or other such plan established by an employer for benefit of its employees and their beneficiaries; (4) property passing by the decedent’s exercise or nonexercise of any power of appointment given by someone other than the decedent.

To simplify, a surviving spouse cannot receive any portion of something that they already agreed to give away by way of previously consenting to it. As it relates to subsections (2), (3) and (4), accounts that have a beneficiary designation will pass to the named beneficiary. Additionally, the surviving spouse waives the right to seek other items they may have been entitled to if they choose to exercise the elective share. The surviving spouse must reduce to writing their intent to exercise the elective share and timely file with the court. Either spouse may waive their right to exercise the elective share before or during the marriage or even after death of their spouse. It is wise to consult with an attorney to see if choosing the elective share is the best outcome if you are left out of a spouse’s will.

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Legal Separation

Pennsylvania does not recognize legal separation in that there’s nothing you would file with the court to establish separation. Instead, it is a date established between the parties that later becomes relevant in establishing grounds for divorce or valuing assets that need to be divided. Separation does not mean the parties have to live separately. Separation is defined as the termination of cohabitation, whether living in the same residence or not. At the latest, it shall be presumed that the parties commenced to live separate and apart on the date that the divorce complaint was served. However, the date of separation can be an even earlier date if one party moves out of the marital home or makes it clear to the other party that the marriage is over by stating so clearly or even reducing it to writing. The effect of establishing “separation” goes toward starting the clock on a two-year separation divorce as well as establishing a cut-off date for valuing the marital estate.

New Jersey does recognize legal separation in the form of divorce from bed and board. Both parties must consent to a divorce from bed and board. The parties will still be legally married but are able to achieve separation financially. Just as with a divorce, the parties can enter an agreement to divide all their marital property or submit to the court for a decision on division. Alimony may also be awarded where appropriate. Health insurance may continue if covered by the other spouse and legal separation is not specified as a reason for termination. A divorce from bed and board can be converted to a divorce from the bonds of matrimony if the parties elect to go through with a full divorce. It can also be revoked such that the parties resume their marriage.

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The Possibility Coaches

The Possibility Coaches are hosting a free lecture titled “How to Emotionally Thrive During & After Divorce!” at our Langhorne office on January 29, 2014. Jon Sattin and Chris Pattay are the partners behind the Possibility Coaches and focus on empowering men and women alike to lead meaningful lives and engage in healthy, successful relationships. Sattin and Pattay started coaching together in 2002 and have labeled themselves as relationship, divorce, and life coaches. As it relates to relationships or divorce, their goal is to help in navigating through the emotional aspects as well as provide a framework for rebuilding to achieve a happier, healthier life. The lecture will be held from 7 AM – 8 AM. Please contact our office for additional information and to reserve your spot for this free event!

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Debt Compromise

It can be difficult to catch up on support if a large arrears balance accrues. Unfortunately, sometimes the party paying support has good intentions to pay support but due to circumstances out of their control, end up falling behind. It may be possible to arrange a settlement to clear up an arrears balance. The settlement will generally involve a reduced total in exchange for a lump sum payment. Such an arrangement can be agreed upon between two private parties at any time. There is more gray area when the debt is owed to the State.

The majority of the states either have a fully implemented debt compromise plan or make a decision on debt compromise proposals on a case-by-case basis. The rationale in even allowing debt compromise is to increase the likelihood the states will receive some of the debt owed as opposed to no payment at all. Pennsylvanian and New Jersey both consider debt compromise plans on a case-by-case basis. In Pennsylvania, by rule of the Supreme Court, any compromise on debt owed to the state must be approved by court order.

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County Differences: Support

There are some differences in procedure among the different counties even though the same law applies. One example is as it relates to support proceedings. Bucks County uses a two-tier system for handling support matters. The first step involves a conference before a court officer. At the conference level, both parties are required to bring proof of their income in the form of pay stubs, tax returns, W-2’s, etc. The officer presiding over the conference will use the income information provided to determine the net income of the parties and subsequently run a calculation based on the state-wide guidelines for support. If the parties are agreeable to the support number generated by the calculations, they can sign a final order for support in that amount. If either party is not agreeable, the next step is a hearing before a Judge.

Montgomery and Philadelphia Counties use a three-tier system in support cases. The first step is a conference as is the case in Bucks County. The second step is a Masters Hearing. The Master is not a Judge but an attorney specially trained in support matters. The Master will hold a hearing where they can hear testimony from both parties and review exhibits. At the conclusion of the hearing, the Master will make a report outlining recommendations for support. The parties receive a copy of the recommendations and are advised that if they do not file exceptions to the recommendations within the time frame allotted, the recommendation becomes a Final Order. If exceptions to the Master’s recommendation are filed, then the matter proceeds to the third-step which is a hearing before a Judge.

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National Adoption Day

November is National Adoption Month. This is the 18th year for recognition of National Adoption Month. It started as National Adoption Week in 1984 on the motion of President Ronald Reagan. In 1995, President Clinton extended the recognition from a week to the entire month of November. Pennsylvania participates in presentation of a proclamation every year regarding National Adoption Month pledging its commitment to make sure every child has a place to call home. Pennsylvania specifically recognizes the Statewide Adoption & Permanency Network and PA Adoption Exchange as organizations that work towards the overall goal of permanency for all children.

In addition to a month-long awareness, a National Adoption Day is also recognized. This year it will be November 23, 2013. Philadelphia celebrated last week by completing eighteen adoptions on November 15, 2013. In addition to the completion of the adoptions, the Philadelphia Family court provided face painters, balloons and  Mummers as part of their celebration. Another event was held on November 19th in Harrisburg, PA as Dauphin County celebrated National Adoption Day. PA estimates that currently there are approx. 2,500 children in foster care awaiting adoption. You can visit www.adoptpakids.org for more information on the adoption process as well as many of the children in need of a home.

 

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Service in Divorce

Once a divorce complaint is filed it must be served on the opposing party before the matter can proceed. Pennsylvania Rule of Civil Procedure 1930.4 discusses acceptable methods of service for all domestic relations matters. The complaint must be served by personal service or certified mail, restricted delivery, return receipt requested. If personal service is accomplished, the person effectuating service should complete an affidavit of service indicating when and where the opposing party was served. Personal service can be carried out by any adult that is not a party to the action. The Sheriff can be contacted to effectuate personal service for a fee. There are also numerous process server companies that will effectuate service for a fee. Alternatively, the opposing party can opt to sign an Acceptance of Service form which serves to waive any defects of service under the rules.

Service in a divorce matter generally must be accomplished within 30 days of when the complaint was filed. The exception is where service will be done outside of the Commonwealth in which case 90 days is permitted. If service is not completed within the applicable time frame, the complaint must be reinstated. After the reinstatement, a new time period begins to run. However service is accomplished, proof of service should be filed with the court. If service cannot be accomplished, the court can be petitioned to allow service by publication. The petition for service by publication must describe all the efforts made to find the other party by other means. If the petition is granted, notice would be published in a legal publication and a newspaper of general circulation in the county of the other party’s last known residence.

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Vanishing Credit

The court may give credit for individual property brought into the marriage depending on the circumstances. Generally, any credit to be received decreases with the length of the marriage. For example, Bucks County will reduce the credit by 5% a year such that there is no longer a credit after 20 years. A prime example of a situation where this rule would be applicable is the purchase of a marital home. Say Spouse A contributed $40,000 of their pre-marital money to the purchase of the house. If the parties separated after 5 years, the amount of Spouse A’s individual contribution is reduced by 25%. Accordingly, Spouse A would argue that 75% of the $40,000 down payment, or $30,000, is their separate property and not subject to equitable distribution in the divorce.

The rules on credit for individual or pre-marital property can vary county to county since it’s not a statute, but more or less a policy used by the respective Masters when looking at the marital estate in a divorce matter. Be careful with the commingling of individual property with marital property. It will be hard to make an argument on the amount of individual property that should be credited to a party if it’s hard to trace the source of the funds. If you encounter a situation in your divorce where it may be necessary to make a distinction between assets that are clearly marital versus those that you can trace back as being pre-marital and/or separate, you should be sure to consult with an attorney with experience in the valuation of these type of assets or risk all of the assets being addressed in equitable distribution and subject to division with your spouse.

Click here to read more on dividing marital property in divorce.

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Pre-Trial Conferences in Custody

A number of changes to the Pennsylvania Rules of Civil Procedure regarding custody took place this summer. One change, Rule 1915.4-4, provides the opportunity for a pre-trial conference in a custody matter. Either party may request the conference by written request in the form of a praecipe. Alternatively, the court can schedule one on its own motion. The timing of the pre-trial conference is after the parties have made their initial appearance at a custody conference but prior to the hearing scheduled before a Judge. The Rule provides the pre-trial conference should be scheduled at least 30 days prior to the start of a custody hearing. The Judge will preside over the pre-trial conference in chambers if both parties are represented.

 

At least 5 days prior to the pre-trial conference, each party must submit a statement to the court as well as the opposing party. The statement must include the name and address of all anticipated witnesses, including expert witnesses, along with their relationship to either of the parties, if any. The statement should also include a proposed custody order setting forth the schedule sought. Finally, all exhibits and/or reports that may be referenced in a hearing must be served on the opposing party but not submitted to the court. The goal of the pre-trial conference is to narrow and/or resolve any issues remaining for trial and encourage settlement of the case. At the conclusion of the conference, the court will enter an order outlining any agreements reached and limiting the issues for trial to those not already resolved. Hopefully this new procedure will be useful and reduce the likelihood of unnecessarily contentious custody battles in open court.

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