Laurie Schmitt Family Law

W. Michigan family law specializing in Collaborative Divorce

616-608-4634

Financial Issues

I have filed for a Divorce, now what happens with the Marital Home?

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I have filed for a Divorce, now what happens with the Marital Home?

In any divorce situation, one of the most major and complex elements to be dealt with is the division of marital assets. As the marital home is typically the largest asset of divorcing couples, it’s important to know your options.

The most common dispositions of the marital home is that it will be sold, or one party retains it. There are other options. But, for the purpose of this blog, these are the two options that will be discussed.

SELLING THE MARITAL HOME: Often during a divorce, neither party is able to retain the marital home, and the home must be sold. It may be that neither party can afford the mortgage on their own, or neither party can afford to refinance to buy the other party out of their equity in the marital home. If you and your spouse have decided that selling the marital home is necessary, the first thing you must do is to agree on a date to list the marital home. Additionally, you must agree on a realtor, a list price, and eventually a sale price. Typically, the proceeds or deficiency would be divided equally between the parties. There are many exceptions to this rule, such as one party having special equity in the marital home, or one party receiving more than one half of the equity for various reasons.

ONE PARTY RETAINS THE MARITAL HOME: If one party will be retaining the marital home, then an appraisal should be completed by a licensed appraiser. That appraisal will give the parties and their attorneys a basis in which to appropriately value and make a division of the equity. Equity is determined by taking the current appraised value and subtracting the current outstanding loan(s) on the property, leaving you with the equity in the home.

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If one party is retaining the marital home, they will be required to “buy out” the other party’s one half of the equity. This can be accomplished by either refinancing the marital home, or providing the equity from another source in the assets of the marriage, such as retirement account. As a very simple example: Party “A” wishes to retain the marital home, and has a retirement account worth $100,000. Each party is to receive $50,000 of the retirement account. The equity in the marital home is $50,000. Party “B” is to receive $50,000 for their share in the retirement account, and $25,000 for the equity in the home. Party “A” would then pay party “B” $75,000 from their retirement account for payment of the retirement account and equity in the marital home. Of course, this scenario requires a retirement account balance large enough to accommodate payment of the equity, after the division of the retirement account.

Yet, another “buy out” option of the other party’s equity in the marital home would be to make payment of the equity over time. This would require the parties to agree to post-divorce installment payments, or a lump sum payment at a specific time.

As the decision regarding the marital home is a complex subject, it should be fully addressed with a qualified family law attorney.

Laurie Schmitt of Schmitt Law, PLLC is a West Michigan family law attorney specializing in collaborative divorce as well as separation, divorce, child custody and support, paternity, and other family law litigation. She is licensed by Michigan State Bar and the U.S. District Court for the Western District of Michigan, and has extensive advanced training in divorce mediation and collaborative divorce. Contact Laurie at (616) 608-4634 for a confidential consultation.

How to Control the Cost of your Legal Fees

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How to Control the Cost of your Legal Fees

Every client has concerns about what their case will cost. Like all other professionals, attorneys do charge for their time. However, there are ways you can work with your attorney to control your legal fees.

You can reduce your legal fees by doing your own legwork by providing your attorney with complete financial information regarding your assets and debts. Gather documentation for your bank accounts, retirement accounts, credit cards, stocks, bonds, deeds, and titles. This saves the attorney from having to formally request the information from the other party or other attorney. There are times when you simply will not have access to the other party’s information. However, if the attorney can limit the requests to the other party, you save money.

Communication with your attorney is key in effectively working for you. An e-mail is an inexpensive way of keeping your attorney informed with necessary information about your case. An e-mail gives the attorney a chance to think about your concern before they communicate with you, and often takes less time than a telephone call. And frequent telephone calls add up quickly.

In most cases, you are billed for all time the attorney spends working on your case. You will save money by addressing simple issues such as working with your spouse to divide personal property or deciding who will pay for the household bills through the divorce. Of course, there will be times you simply are unable to negotiate with your spouse, or come to an agreement. But, making the attempt to do so prior to attorney intervention will prevent unnecessary attorneys fees.

Together, you and your attorney should discuss your unique situation, and find other ways to work efficiently. If you and your attorney are mindful of what needs to be completed in your case, and consider the cost and benefits of each task, your attorney can provide you with the best legal representation with the resources available to them.

Financial Fragility – What will your future hold post-divorce

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Financial Fragility – What will your future hold post-divorce

The May 2016 issue of The Atlantic Magazine contains an article discussing the “financial fragility, financial insecurity, and financial distress” of Americans. It states that people have more debt than assets to divide, and insufficient income to support two post-divorce households. With the hollowing out of the middle class, even professionals struggle to get from paycheck to paycheck. What will your financial future hold after divorce?

The Secret Shame of Middle-Class Americans

Common Divorce Questions: What About the House?

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Common Divorce Questions: What About the House?

For most couples seeking a divorce, the house is their most valuable asset.  One or both of them may be emotionally attached to the house.  What I tell my clients from the beginning is that there are three options:

  • The husband gets the house.
  • The wife gets the house.
  • They sell the house and divide the equity.
    • It is important to understand why one party wants to stay in the house.
  • Is it emotional issues causing that desire?
  • Is it because that is where the children were born or raised?
  • Is this their first house?

There are generally a lot of emotional connections to the house, but you can make another connection to a new affordable home.  I try to help both parties to understand what is involved if one party insists on keeping the house and the benefit of selling it and dividing the equity.

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Can the Party Who Wants the House Afford to Keep It?

First Issue: If you or your spouse insists that for them keeping the house is the only option, we need to determine if you or they can afford the house after the divorce.  Meeting with a mortgage loan officer at a bank is the first step.  I want my clients to meet with a loan officer early in the divorce process to see if you can qualify for a mortgage loan on your current home.  If you cannot qualify, there is no sense in spending money on attorney fees fighting for a house that you cannot afford.  I also want to know if the other party that wants to retain the home will they qualify to ensure that, as my client, you get your part of the equity out of the house.

Second Issue: Even if the party can qualify for a loan in his or her own name and after removing the name of the other party from the deed, what about maintenance and upkeep?  Can a new budget accommodate the new loan payment and cost of maintaining the home?  Keeping the house but not being able to afford to maintain can make your post-divorce life miserable.  Ultimately, your goal for post-divorce should be to have a life that allows you to successfully move forward without an economic millstone around your neck.

Selling the House and Dividing the Equity

The best resolution is often to sell the house and divide the equity.  This should be decided early in the divorce process, so the house can get on the market as quickly as possible.  The couple may agree on the value of the home, but getting a professional appraisal is best.

Additionally, we do not want the house to go into foreclosure status, so the mortgage payments and upkeep must continue until the asset is sold.  We also must decide on what realtor to use.  If the parties cannot agree on these simple solutions, we will get the court involved.

For assistance in making this major financial decision, and assistance in moving on to a new chapter of your life, contact Schmitt Law, PLLC to schedule an appointment.

Common Divorce Questions: Is there Alimony in Michigan?

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Common Divorce Questions: Is there Alimony in Michigan?

Michigan law allows for spousal support, commonly referred to as alimony.  There is no set formula as to how the amount of support is determined.  Each case is decided according to its unique circumstances.

Factors Courts Consider for Alimony/Spousal Support

When one party requests alimony, the court considers many factors before deciding to order support, and if so, how much, and for how long.  Those factors include:

  • Past relations and conduct of the parties.  Although Michigan is a no-fault state, fault may be considered for the purposes of spousal support.
  • Length of the marriage.  The longer the marriage, the greater the likelihood support will be ordered.  A spouse in a short-term marriage, which is not defined in the law, will generally not receive support.
  • The ability of each party to work.  One party to the divorce who has not worked outside the home for a long period of time may not have the skillset to get a job.
  • Source and amount of property awarded to each one.  If the person requesting support is walking away with a lot of the assets, like equity in the marital home, an IRA, or retirement pension, the court is less inclined to award support.
  • Age of the parties.  This affects the ability of a party to find a job.
  • The present situation of each party.  This includes the earning potential of each party, whether there are minor children who need to be cared for, and other similar factors.
  • Health of the parties.  Does one spouse need to be cared for and the other one healthy and who has the ability to pay?
  • The standard of living while they were married.  The court does not want one spouse to be living quite well while the other one lives in poverty.  The court will fashion an order to equalize the standard of living of the party’s post-divorce.
  • Any other factor the court deems relevant.  This is a “catch-all” factor intended to allow the court to consider any factor to help make the decision based on the general principles of equity and fairness.
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How Schmitt Law, PLLC, Can Help

Although there is no set formula, at our Schmitt Law office we have a software program where we enter all the objective evidence.  It then gives us a ballpark amount of what we should request for spousal support, and for how long the client should receive support.  We work with these numbers to try to effectuate a settlement without court intervention.

If no settlement is forthcoming, we then prepare a trial brief that goes through all the factors in detail, so the court can see that our numbers are good ones.  We still understand that the judge has full discretion in determining the outcome of spousal support.

For more information and assistance with your divorce issues, contact us at Schmitt Law, PLLC.

Common Divorce Questions: How Is Child Support Determined?

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Child support can be a contentious issue.  The way it is resolved in our jurisdiction is that all family law attorneys use the same support formula the court uses.  We have a software program at Schmitt Law, PLLC, that we use to determine the amount of support one parent pays to the other.

What is Child Support?

Child support is a court-ordered payment from one parent to the other to help support the raising of the children.  It stems from the legal theory that children have a legal right to financial support from both parents.  A parent cannot avoid paying child support by agreeing to have his or her parental rights terminated.

The Michigan child support formula determines which parent will pay support.  Some factors considered are:

  • The income earned by each parent.
  • The number of children that are supported.
  • How many overnights the children spend with each parent.

We put those numbers into our software program, and it objectively gives us a number.  The parents can deviate from that amount only if there is a legitimate reason to do so.

If one parent wants the other to pay a different amount, we must do a deviation addendum explaining why and file it with the court.  A friend of the court and the court must approve the request, and then it becomes the order of the court.

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Why Does a Parent Pay Child Support?

Some parents get confused about why they pay child support.  They may say “I buy everything for my kids.  Why do I have to give the other parent any money?”  The answer is that Michigan state law says it is the child’s right to receive support and the parents may not waive it.

The child support formula involves determining amounts to be paid by each parent for:

  • The uninsured portion of health care costs to be paid by each parent.  The custodial parent will have to reach a certain amount of out-of-pocket payments before that number is used.
  • Basic needs for food, clothing, and shelter.
  • School supplies.
  • Extracurricular activities.

If the parents want to agree on an amount, and the court confirms it meets the needs of the children, the parents can do that.

One thing the court cannot do is mandate how the receiving parent spends the money.  That parent does not have to keep an accounting of how the money is spent.  The paying parent cannot micromanage the spending habits of the receiving parent.

Am I am able to receive child support during the pendency of the divorce action?

On the onset of the divorce, either party may file a motion to establish temporary custody, parenting time, and child support.  This Order will remain in effect until the Court issues a new Order, or until the Judgment of Divorce is signed.

For assistance with your child support issue, contact me, Laurie Schmitt, at Schmitt Law, PLLC.  I am an Attorney, Mediator, and Collaborative Divorce lawyer.

Common Divorce Questions: How Do We Keep the Cost Down in Our Divorce?

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Common Divorce Questions: How Do We Keep the Cost Down in Our Divorce?

A major concern of divorcing couples is the cost of the divorce.  The bottom line is that the more adversarial the couple is the more the divorce will cost.  The more the spouses fight about issues the more expensive the divorce will be.

Asking the court to settle issues that the spouses could settle between themselves costs money.  Motions are filed.  The other party responds.  Court time must be reserved.  All these things are costly.  The cost of divorce depends almost entirely on how much the couple fights and how willing they are to settle the issues amicably between them outside of court.

Avoid the “Tupperware Wars”

The cost of divorce is driven by the parties’ willingness to set aside their anger and to start making good and logical decisions.  Paying attorneys to fight with each other over something the couple could resolve between them does not make sense.

Spouses often argue over the division of petty items that can be easily replaced.  I refer to these fights as the Tupperware Wars.  There are sensible ways to divide or replace these items without court intervention.

For example, the parties fight over who gets an asset when it would be less expensive for them to let the other party have it and for them to go buy a new one.  People fight over things like who gets the Monopoly game?  Who gets the everyday dishes?  Who gets the Tupperware?  It is far less expensive to buy (new dishes, Monopoly game or Tupperware) than to pay for drawn-out court appearances where the court is forced to make a decision that neither party may be happy with.

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Suggestions for Dividing Heirlooms and Other Expensive Items

There may be heirlooms of sentimental value that cannot be replaced.  Perhaps the couple owns a grand piano or antique cars.  These items need to be appraised and a monetary value attached to them.  This still may not resolve the emotional issues attached to the items.

A spouse may need counseling to deal with the emotions involved in the divorce and over items with sentimental value.  That is not the role of the attorney who has no training in that area.  My office has a list of good counselors I feel confident recommending.  I work with my clients to find someone who is on their healthcare provider list.  In a divorce case it is better to have the attorneys work on the legal issues and allow those who are qualified to counsel to do so.

In reaching an out of court settlement the only time the court hears from the clients is at the final hearing.  The court will likely congratulate the parties on working well together to get it done without the court’s intervention.

For assistance on asset division and any other aspect of your divorce process, contact me, Laurie Schmitt, at Schmitt Law, PLLC.  I am an Attorney, Mediator, and Collaborative Divorce lawyer.

Enforcing Child Support / Friend of the Court

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The Friend of the Court is responsible for enforcing child support orders.  Many enforcement methods (described below) can be used if a parent does not follow terms of the order.

Income Withholding

An income withholding order can be used to collect both current and past-due support (arrearages).  All new and modified child support orders are required to include income withholding, unless both parents and the court agree on other payment methods.

Under income withholding, child support and medical support payments are deducted from the non-custodial parent’s paycheck.  The employer sends the support payments directly to the Michigan State Disbursement Unit (MiSDU).  Federal and state laws require employers to honor income withholding orders.

A parent’s income from other sources, such as unemployment benefits, Social Security benefits, independent contracting, workers’ compensation claims, and insurance claims are also subject to income withholding.

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Tax Refund Offset

If the amount of past-due support (arrearages) reaches a certain level (threshold), both federal and state tax refunds can be intercepted to pay support.

The past-due threshold for state tax refund offset is $150.  The federal past-due threshold is $150 for cases that receive cash assistance; the non-cash assistance threshold is $500.

For both state and federal tax refund offset, the person who owes the support receives a notice explaining his or her right to object to the tax refund offset and reasons to object.  In a joint tax return, a spouse may make a claim to retain his or her portion of the refund.

Show Cause/Bench Warrant

A person who has not paid child support or has not provided medical support can be ordered to appear before the court to explain to the court why he/she should not be held in contempt.  This is called a show cause hearing.

If the person ordered to appear at a show cause hearing does not show up, the court may order a variety of enforcement actions, including issuing a bench warrant for the arrest of the person who did not show up for the show cause hearing.

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Lien/Levy

The Friend of the Court or the Office of Child Support can initiate a lien/levy against real or personal property, financial assets, or insurance claims for collection of child support.

License Suspension

Driver’s licenses, recreational or sporting licenses (hunting, fishing, etc.), and professional licenses can be denied, suspended or revoked if a parent is behind more than two months in payments.

Credit Reporting

If a parent is behind more than two months in payments, he or she is automatically reported to a consumer credit reporting agency.

Passport Denial

A parent’s passport may be denied or revoked when he or she reaches the past-due support threshold of $2,500.

National Medical Support Notice

Enforcement of medical support is done through the National Medical Support Notice for employer-provided insurance or through any of the other enforcement methods listed if cash payments are required.

Pension Account(s)

A Qualified Domestic Relations Order (QDRO) is a support order against a private pension account.  An Eligible Domestic Relations Order (EDRO) is a support order against a state or federal government pension plan.  A QDRO or EDRO can be issued for current support or past-due support (arrearages).

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Surcharge

A judge may order a surcharge be added to a case that has arrearages.  If a surcharge is ordered, it will be added to the case every January 1st and July 1st and become a part of the total amount of support owed.  The surcharge is a variable rate tied to five-year United States Treasury Notes, plus 1%.

Criminal/Felony Charges

The Friend of the Court can refer the case to the county prosecutor, who may charge the person who owes support with the crime of felony non-support.  In some counties, the case may be referred to the Attorney General for criminal prosecution of felony non-support.  Felony non-support charges are generally issued after other child support collection methods have not been successful.  Custodial parents may also ask the county prosecutor or Attorney General for felony non-support prosecution.

For assistance with your child support issue, contact me, Laurie Schmitt, at Schmitt Law, PLLC.  I am an Attorney, Mediator, and Collaborative Divorce lawyer.