Atlanta Divorce Attorney Blog

As a family law attorney, I have seen several situations where a party previously entered into a divorce settlement agreement and agreed to take on certain debt and, subsequently, became unable to make payments on the debt. The situation becomes even trickier where one spouse agreed to pay a debt that is in the name of the other spouse.

Consider a situation where, under a divorce settlement agreement, the husband kept a car that was in the wife’s name, and the husband was required to make payments on the car. A couple of years later, the husband is no longer able to afford the car payments. What happens?

One option is the wife can file a Petition for Contempt against the husband to try to force him to resume making the payments. A potential problem with this route is that the husband has to miss a payment before the wife can file the petition. In addition, while a judge can hold the husband in contempt and order him to resume the payments, if the husband is unable to do so, the wife’s credit will continue to take a hit for every missed payment.

Another option the wife may consider is trying to reach an agreement with the husband wherein the husband would give her the car back, and she would resume making payments. Under this option, she will protect her credit. If the parties choose to go this route, however, the agreement must be put into writing. If the wife had a lawyer represent her in the divorce, I would suggest that she go back to him or her to draft a document that clearly spells out a new contract between husband and wife. This is because there is a Court Order that says that the husband received the car in the divorce. The Order does not prevent the husband from voluntarily giving the wife the car at issue, but the transaction needs to be in writing in case an issue comes up later and the husband wants the car back.

By Patrick L. Meriwether, Partner, Meriwether & Tharp, LLC

In its article titled: “Has Student Loan Debt Impeded Your Romantic Relationships?” the American Bar Association discussed a new phenomenon experienced by some graduates of institutions of higher learning. This experience includes being rejected romantically, or losing a relationship, because of student loan debt. The article highlights the story of an Art teacher, with nearly $80,000 worth of student loan debt, who reports being dumped as a result of her debt. Although it may be interesting to follow the trend regarding the dissolution of relationships as a result of student loan debt, a slightly more interesting issue is: What happens to student loan debt in a divorce?

In Georgia, upon divorce, marital property, assets and debt are not divided equally or 50/50 as they are in community property states like California. Georgia is an equitable division state. This means that upon divorce, marital property is divided “equitably,” or fairly, according to the determination of a judge or jury hearing the facts of the case. Fuller v. Fuller, 621 S.E.2d 419 (2005) and Arkwright v. Arkwright, 284 Ga. 545 (2008).

However, only marital property, or property that was acquired during the marriage is subject to equitable division. Payson v. Payson, 274 Ga. 231 (2001). Separate property, or property acquired prior to the marriage, or property acquired by gift, inheritance, bequest or devise during the marriage, is generally not subject to equitable division. Bailey v. Bailey, 250 Ga. 15 (1982).

Although there is no case law directly on point regarding the division of student loan debt upon divorce, applying current Georgia case law to the issue, it is likely that student loan debt would be treated just like any other property or debt upon the dissolution of a marriage. Thus, if the student loan debt was acquired prior to the marriage, it will likely be treated as separate property, and the spouse who accrued the debt will remain solely liable for its repayment. However, if the debt was acquired during the marriage, especially if the debt is titled in the names of both spouses, the issue of how the debt may be divided upon divorce becomes more complex.

Although financial issues like the repayment of debt are issues that are best discussed and resolved prior to or during the marriage, unfortunately it is often only upon divorce that these issues are raised and resolved. Thus, if you are currently considering, or going through, a divorce, and you have questions about the division of your assets and debts upon divorce, contact one of the many knowledgeable Family Law Attorneys at Meriwether & Tharp, LLC. We will be more than glad to assist you.

By A. Latrese Martin, Law Clerk, Meriwether & Tharp, LLC

In June of this year, a New York man brought a suit against his ex-wife alleging that she failed to disclose her $1 million shoe collection during their divorce. In his suit, Daniel Shak alleges that his ex-wife, professional poker player Beth Shak, failed to disclose her shoe collection and, thus, he may be entitled to retain more assets under their prior divorce settlement. The story can be found on the web here.

While this story is certainly an extreme, it brings up a few important points that anyone going through a divorce in Georgia should consider. First and foremost is the duty to fully disclose your income and assets. Pursuant to the Georgia Uniform Superior Court Rules, each party to a divorce action (with a few exceptions) is required to complete a Domestic Relations Financial Affidavit. This is document, sworn to under oath, setting forth your income, monthly expenses, assets, and liabilities. It is very important that all assets are disclosed on this document, as failure to do so could later lead to an agreement being set aside for fraud.

The story of Beth Shak’s shoe collection should also be a lesson to be mindful of your spouse’s spending habits. As the article about Shak points out, it seems bizarre that her husband would not realize that his wife has a serious shoe addiction. At a minimum, it calls into question how much of an investigation Mr. Shak and/or his attorneys undertook before the parties entered into a divorce settlement. Each party to a divorce has the right to conduct discovery, which would include examining bank and credit card statements. Presumably, such an investigation would have evidenced Ms. Shak’s high-dollar Chirsitian Louboutin and Manolo Blahnik purchases. Before entering into any settlement agreement, a party to a divorce should make certain that they are satisfied that they know enough about the other’s party’s finances to make a fully informed decision.

If you have questions about how your spouse or ex-spouse’s non-traditional assets might affect your divorce, do not hesitate to contact one of our Atlanta divorce professionals.

By Melissa Tracy, Associate, Meriwether & Tharp, LLC

Many people consider pets to be members of their family. Although you may consider your loving pet to be your child, Georgia law considers pets to be personal property, as opposed to children, and subject to equitable division in a divorce. This means that the court will award ownership of Rover to one party or the other, and will not set up a visitation schedule for each party to spend time with Rover. Unlike with human children, there is no current law that allows the court to consider the best interest of the pet when determining which party will be awarded Rover.

Because Georgia law does not provide any guidelines for courts to follow when deciding which party to award ownership of a pet, divorcing pet owners may find that the best course of action is to enter into a settlement agreement, whether they settle all issues in the divorce or just those related to Rover. In a settlement agreement, parties can agree to a wide variety of arrangements concerning their pet, including one which would allow each party time with Rover after the divorce.

If you are dealing with how to best address your pet’s future post-divorce, we recommend you contact one of our Atlanta Divorce Attorneys to counsel you on your options.

By: Courtney H. Carpenter, Associate Attorney, Meriwether & Tharp, LLC

The short answer to whether trust assets are subject to equitable division in Georgia is no. Now for the longer answer…

The first case worth discussing is Avera v. Avera, 253 Ga. 16 (1984). In Avera, the wife sought to subject the corpus of her husband’s trust to her claims for alimony and child support. She argued the trust was invalid and that, because her ex-husband was the sole settlor, sole trustee and sole beneficiary of the trust, as a creditor, she should have access to the corpus of the fund. The Georgia Supreme Court has made clear in a string of earlier cases that spouses can be creditors, holding that “a spouse seeking alimony in a divorce action, which is an equitable proceeding, is considered a creditor.” See Speed v. Speed, 263 Ga. 166 (1993); see also Carter v. Bush, 216 Ga. 429, 430 (1960).

The Court ultimately found that the husband was not the sole beneficiary of the trust as the remainder was to be divided equally among his children upon his death. The Supreme Court affirmed the lower court’s ruling that the 1) the trust is valid; 2) the husband’s interest in the net income of the trust is subject to alimony and child support claims by the wife; and 3) the principal of the trust cannot be reached by the wife.

Avera was followed by Speed v. Speed, 263 Ga. 166 (1993), another Supreme Court case dealing with divorce and assets in a trust fund. In Speed, the husband was injured in a car accident and received a lump sum settlement which he transferred into an irrevocable trust, naming himself the sole beneficiary. The trust contained a spendthrift clause, which prohibited the involuntary alienation of trust property for the satisfaction of debts or obligations incurred by the husband. The spendthrift clause was found unenforceable because the husband was both sole settlor and sole beneficiary of the trust. As a result, the wife, as a creditor, was able to reach her husband’s interest in the trust for purposes of alimony and distribution of property.

Most troubling in Speed, is that the Court held that the wife was permitted to access not only the husband’s income from the trust, but also the principal of the trust for purposes of distribution of marital property. The court held that the reason for invalidating the self-settled trust was to prevent a person from placing his own assets into a fund where he was the sole beneficiary, effectively shifting the settlor’s assets from one pocket to another. If parties avoid such obvious self-dealing, then the corpus should be left intact.

Speed was followed by another Supreme Court case, McGinn v. McGinn, 273 Ga. 292 (2001). In McGinn, the husband was the beneficiary and co-trustee of a trust containing stock in a company owned by members of his family. The wife argued that because the husband controlled the trust as co-trustee, she ought to be entitled to discover information regarding the value of the stock held in the trust for purposes of alimony and equitable division of marital property.

Because the husband was not the sole trustee, the Court explicitly stated that the corpus of the trust was not subject to the wife’s claims for alimony, child support or equitable distribution. However, the husband’s interest in the trust is one of his assets and is relevant to the determination of alimony and child support.

It appears clear that the rule of McGinn will hold and that where a person does not act as sole settlor, sole trustee and sole beneficiary, the corpus of the trust will not be reached in a divorce action. Fortunately or not, depending on your position, McGinn is similarly clear in recognizing a common theme in Georgia cases that a person’s income derived from a trust is, however, relevant to the calculation of alimony.

By Connor Alexander, Law Clerk, Meriwether & Tharp, LLC

The Supreme Court of Georgia recently heard an appeal of a divorce case where the wife alleged error in calculating her interest in the husband’s pension and setting the alimony amount. Hammond v. Hammond, S11F1978 (2012). In that divorce case, there were very few marital assets, the most significant of which was the husband’s pension, which was vested, but had not yet matured. Id. According to Georgia law, this specific pension could not be attached, subjected to process, or assigned. Id. Thus, the trial court was limited in the ways it could be utilized for equitable division purposes. After a hearing where extensive evidence was presented, the trial court equitably divided the marital assets including an alimony award to the wife of $750 per month for 24 months. In addition, with regard to the pension the trial court ordered the husband to pay the wife alimony “in the amount of $1,250 per month, starting the first month husband receives his monthly pension benefit.” Id. at 2.

The wife appealed, arguing “the trial court erred as a matter of law in determining the amount of the award of alimony pertaining to husband’s pension benefit because it bears no relation to the correct valuation of the pension.” Id. at 3. Specifically, the wife alleged that the trial court should have used the time rule formula to quantify the value of the pension rather than distributing it as alimony. However, the trial court chose to evaluate and distribute the pension as alimony at the wife’s urging and, according to the Supreme Court of Georgia, the wife cannot now complain of error induce by her own conduct. Id. Moreover, a trial court is “given wife latitude in fixing the amount of alimony and child support,” and the Court found no abuse of discretion here. Id.

The wife further alleged that the court erred in calculating the amount of alimony to be awarded from the pension. Generally, alimony is awarded in accordance with the needs of one party and the ability of the other party to pay. The trial court has great discretion within these parameters. The Supreme Court of Georgia rejected the wife’s argument here because there was evidence that the trial court considered several factors, including “the value of the pension, the overwhelming marital debt, husband’s contribution of inherited assets to the marriage, and wife’s recent promotion.” Id. at 5. Thus, the Court held that the trial court did not abuse its great discretion in setting the alimony amount from the pension.

In Georgia, it often occurs that one party wishes to retain the marital home after a divorce. If the Husband and the Wife’s name are both on the mortgage loan documents as the borrowers, the question then becomes how to remove the name of the party relinquishing their interest in the home so that they are no longer liable for mortgage payments. Even in divorce situations, most lenders are unwilling to remove borrower’s names from loans because it leaves them less recourse in the event of a default or a foreclosure. To remove a party’s name in these situations, the loan either must be satisfied in full or the party wishing to retain the home must refinance.

When a home mortgage is refinanced, the existing mortgage is replaced by a new mortgage that has different terms. This process is frequently used to, among other things, achieve a better interest rate or consolidate debts. In a divorce situation where both party’s names are on the mortgage loan and one party is to retain the home, the party who is keeping the home is often required to refinance the mortgage into their name only. In today’s struggling real estate market, refinancing has become a problem due to the number of people who owe more on their home than it is worth. In these situations, a solution may be the Home Affordable Refinance Program (HARP).

HARP is a federally run program that allows eligible parties with mortgages owned or guaranteed by Fannie Mae or Freddie Mac to refinance their homes to a lower interest rate, even if they owe more on their mortgage loan than their home is worth. Eligibility requirements for borrowers wanting to utilize this program include, but may not be limited to: (1) zero missed payments in the last six months, (2) no more than one missed payment in the last twelve months, (3) a current loan-to-value ratio greater than 80%, and (4) no previous refinances under HARP. To determine if your current mortgage is owned or guaranteed by Fannie Mae or Freddie Mac, visit www.fanniemae.com/loanlookup and www.freddiemac.com/mymortgage.

If you are dealing with how to best address the issue of your marital home during a divorce, or are facing contempt action on a Final Judgment and Decree due to your inability to refinance the marital home, we recommend you contact one of our Atlanta Divorce Lawyers to assist you with this process.

By: Courtney H. Carpenter, Associate Attorney, Meriwether & Tharp, LLC

In a divorce in Georgia, the Court has the power to equitably divide property acquired by the labor of the parties during a divorce. For the most part, this means tangible items like houses, cars, retirement accounts, and bank accounts. But what does the Court do with intellectual property—how can they equitably divide an idea?

Georgia Courts have not specifically addressed whether a patent is a marital asset, but they have addressed intellectual property in the form of legal and medical degrees. In Lowery v. Lowery, 262 Ga. 20 (1992), the Supreme Court of Georgia held that the education and degree of the Husband were not akin to real property, and could not be valued as an asset upon divorce. The Court stated that the value of the intellectual property was “too speculative to calculate, being simply the possibility of enhanced earnings they provide. That potential may never be realized for any number of reasons.” The Court went on to state that a degree cannot be transferred and its value terminates upon the death of the Husband. However, unlike a non-transferable asset like education, patents can be sold and there is a thriving market in the sale of patents. Further, patents generate tangible (or otherwise valuable) assets—a patent was behind the creation of every piece of modern technology.

The distinction between a patent and a degree is that a patent is the property of the creator, and the right to intellectual property is one granted by the Constitution, thus it is the right of the creator to sell the patent as he or she chooses. Based on the constitutional granting of these rights, the Georgia courts could take the view that patents are non-marital assets, but include a patent’s potential when considering a party’s ability to pay alimony. Further, the income generated from a patent or intellectual property could be considered income, and a former spouse could receive an entitlement to a percentage of the income generated from the patent as an equitable division of property.

Again, the Supreme Court of Georgia has not addressed this issue in particular, but the Court may look to the case of Goldstein v. Goldstein, 262 Ga. 136 (1992) to determine the value of intellectual property. In Goldstein, the Supreme Court found that the income from an attorney’s contingent fee agreements was not a marital asset due to the fact that it was “nearly impossible” to determine the amount of work and expense that would go into generating income from intellectual property. This would mean that even if the Court determined that a former spouse was entitled to a percentage of the income generated from a patent, the income may never be realized.

The number of international patents filed in 2010 alone totaled more than 160,000, so although Georgia courts have determined that the value of intellectual property is speculative, it is clear that it is an issue that the court will soon have to address.

By Elizabeth Doak, Associate, Meriwether & Tharp, LLC

In more than a few recent cases, the stumbling block to settling the case has been the marital home. As a result of the real estate market meltdown, Atlanta divorce attorneys have had to rethink how they structure agreements regarding real property. So what do you do in a case when neither party wants the marital home? It’s the proverbial hot potato no one wants to be left holding.

When clients are contemplating walking away from a home, our job as divorce attorneys is to eliminate or at least minimize a client’s loss when structuring an exit strategy. The first step in making this happen is to ensure the client has the information necessary to make an educated and informed decision. One of the key pieces of information is how much equity, if any, is in the property. Knowing whether the client would need to bring funds to the closing table if the property were sold allows us to immediately rule out certain options. Other critical facts clients need to be aware of include who is listed as a borrower on the mortgage, how far the mortgage is in arrears and both parties’ financial condition and employment plans.

Several possible alternatives clients may want to consider include bankruptcy, foreclosure, leasing, a short sale and a limited sale. Something I am seeing more often in divorce practice is parties choosing to “walk away” from a property. Although this is not a situation we encourage, in some cases foreclosure is the only option. While “walking away” may not be the best moral decision for some, it may make sense, at least from an economic perspective, to those parties who owe much more than the home is worth. If the parties agree to a foreclosure, the parties need to ensure that the possibility of a Deficiency Judgment is addressed.

Other alternatives to consider are leasing out the property until the market recovers or placing the home on the market in the hope of a short sale. A short sale may not be an option, however, since most lenders won’t even consider an offer on the property for less than the amount owed, unless the borrowers are at least several months behind on the mortgage.

In situations when parties are underwater or facing foreclosure on the marital residence, it is important to have an experienced divorce attorney. Regardless of the situation, an improperly drafted agreement could leave a person with a financial obligation in the divorce case that they cannot even bankrupt. The few hundred dollars a person might save by not having a lawyer draft the agreement can easily be lost if they draft a bad agreement. A knowledgeable attorney can work with you to craft the right agreement, to suit your specific needs and minimize any losses.

By Alyssa Vaughn, Associate, Meriwether & Tharp, LLC

One of the most complicated financial aspects of a divorce can be what happens to the marital home when both parties’ names are on the mortgage. Since one party will likely move out of the marital home after the divorce, that party will likely want his/her name off the mortgage so he/she can buy a new home. If the other party doesn’t refinance to take the moving party’s name off the mortgage, the moving party's rights are going to depend on what is in the settlement agreement or final order granting the divorce.

If the final divorce documents are silent as to the mortgage, then there may be nothing the moving party can do because there is nothing requiring a refinance. If the final divorce documents state, however, that the ex-spouse must refinance within so many days, and he has not refinanced within this time frame, then the moving party can file a Petition for Contempt against him to force him to refinance.