At this exact moment, as this Blog is being authored, there are thousands of New Jersey residents out of work, applying for unemployment, and/or having significantly diminished income due to the Novel Coronavirus/COVID-19 pandemic and state-wide travel and business restrictions. Coexisting with this crisis are thousands of Marital Settlement Agreements, Child Support Orders, Custody Orders and Alimony Orders requiring payments to be made from one former spouse to the other. In subsequent posts I will discuss custody, alimony and equitable distribution; however, this piece focuses on the daily rising number of child support orders and agreements that are not being met. By the time this crisis is over it is conceivable that more than 60% of responsible child support payments will be in arrears.
Historically, when it comes to child support enforcement (and alimony or spousal support) and modification, courts examine the finances and assets of the parties to determine if a change in the financial circumstances has been established to warrant a modification. Is there a loss of job? A loss of income? An increase or decrease in income or the financial circumstances of the parties? The court also seeks to determine the duration of the changed financial circumstances and whether the change is temporary. The seminal New Jersey case on such modifications is Lepis v. Lepis. Lepis, in summary, directs that a payor seeking or requesting modification must make an initial prima facie showing of “changed circumstances” that have prevented them from supporting himself or herself. Either parent may file a motion with the court to increase or reduce child support payments based on a changed circumstance. The parent bringing the motion must be able to prove to the court that he or she has experienced changed circumstances (NJSA 2A:34-23, NJSA 5:6A) that are significant and beyond temporary. If the court determines the circumstances warrant a modification to support obligations, the New Jersey Child Support Guidelines will be used to calculate the new payment.
A variety of circumstances can rise to the level of justifying a modification. Each case is subjectively analyzed and evaluated by the court to determine if a substantial change has taken place, whether the change is permanent and whether it is unexpected. Namely, the change cannot be something temporary and the parent must not have anticipated or purposefully caused the change to occur. Common examples of a substantial change in circumstances may include:
COVID-19 has created a sudden, unexpected change in financial circumstances for many beyond their control. The impact to many has been the loss of jobs, loss of businesses and loss of income, and the individuals have no control as governments are forcing the shut-down of non-essential businesses, travel is restricted, and curfews are in place. In addition, social distancing has become the widespread normal impacting businesses and employers. Given these factors, it is clear that many payors of support have a significant change in their financial circumstances, through no fault of their own and have little options in the immediate foreseeable future. At the same time, this is all new territory and the question that many judges will view differently is whether the change is temporary or more long-lasting sufficient to warrant a modification. Two cases decided pre-coronavirus crisis may prove instructive.
In the case of Stephens v. Pickett, a father filed a motion with the court to modify his child support immediately after he was laid off from his job. The family court granted his motion and reduced his child support obligation by more than half. On appeal, the Appellate Division reversed the family court’s decision, finding that the father filed for a modification of his child support before even attempting to secure another job at similar wages. In fact, his application was made so close in time to his lay-off that he did not have the opportunity to seek alternative employment. For this reason the Appellate Division determined that a true change of circumstances did not occur and, at that point, there was no reason to believe that the father’s change in financial circumstances was “anything but temporary.”
In Goldstein v. Goldstein, the father filed a motion for a downward modification of his support after losing his job. The Family Part judge entered an order denying his motion for a downward modification of his child support obligation.
The parties’ divorce settlement agreement (MSA/PSA) required the father to pay child support of $700 per week for both children and continue to provide medical insurance for them. If he lost coverage through his employer, however, the parties would split the cost of the insurance. At the time of the MSA/PSA and divorce the father was earning a gross annual income of $225,575 as a partner of a law firm.
The parties entered into the MSA/PSA and the father left his law firm due to alleged mental health issues. He then began receiving disability benefits of approximately $16,500 per month from two different insurance companies.
As a result of losing his job, he filed a motion for a downward modification of his child support obligation on the grounds of changed circumstances due to his deteriorating financial position. He included a Case Information Statement (CIS) with his motion that listed $31,824 in reported income for 2015. This amount included some compensation from his former law firm, but failed to disclose $700 per month in additional income from the firm. He also listed a bank account without including the value of the account and significant retirement accounts.
The motion judge denied the motion, despite the precipitous drop in income, and found that his year-to-date income up to the time of his motion was enough to continue child support payments. The judge also noted that plaintiff had substantial retirement assets and still had excess income sufficient to support himself and continue his support obligations. The judge specifically noted that the father failed to report all sources of income, failed to seek other employment, and was in no worse a financial position. Therefore, the judge concluded that a change of circumstances had not occurred.
The Appellate Division affirmed, finding that temporary unemployment is not a basis for a modification of child support. The Appellate Division emphasized that it has consistently rejected requests for modification on the basis of changed circumstances where the change is only temporary or is expected and has not yet occurred.
Both Stephens and Goldstein look at the immediateness of the application in relation in time to the loss of employment and decrease or loss of income. Both cases look at other income, other sources of income, and other job opportunities or the need to seek other replacement employment and/or income. In other words, the coronavirus happened suddenly. causing job loss, income loss and business interruption since March 21, 2020, (ten days ago as of this writing), when Gov. Murphy issued Executive Order 107, closing all non-essential businesses, for the safety and health of the residents. So it must be, as in Goldstein and Stephens, “temporary” given the immediateness of the event. Right? We are told this virus will recede in the coming months. Again, it is temporary. Right?
The counterpoint to all of this, is that something this widespread and pervasive, so quick, has never been seen before, never been dealt with in the context of wide-sweeping business closure, job loss, and income loss nationwide. Take for instance a small restaurant owner or hair salon owner that has simply lost their business and all income right at this moment. Ultimately, they may be able to start a new business in a year or so or re-open somewhere in the future, but the loss of income and business may have caused a complete shuttering of the business. Therefore, when the Stay in Place, Stay Home Order is lifted, they will not simply be able to re-open. In addition, in all of the cases where Lepis is triggered and the issue is change of circumstance, courts look to replacement income, and efforts to seek replacement employment. In the current situation one cannot go out and simply obtain new employment. The barber, for instance, that owns his own salon that is now closed, cannot go and get a “job” as a barber somewhere else because all the salons are closed, nor can the chef get a job at another restaurant. Even if they could, it would most likely be for the same level of income. But it is still temporary. Right? Hopefully, in most cases it will be. That said, one can envision a fact pattern where the permanence and significant impact of the loss or diminution of income is so pervasive already that it will clearly last well past Executive Order 107, the global pandemic and beyond.
Allen J. Scazafabo, Jr.