Is a wife who waived her rights in a separation agreement entitled to receive ex post facto equitable distribution of husband’s military retirement funds in Virginia?

Is a wife who waived her rights in a separation agreement entitled to receive ex post facto equitable distribution of husband’s military retirement funds in Virginia?

Not in the case of Savedge v. Barbour, No. 2713-09-1, where the Court of Appeals of Virginia, in an unpublished summary affirmance (under Rule 5A:27 of the Rule of the Supreme Court of Virginia of the trial court’s denial of wife’s motion for equitable distribution of her ex-husband’s military pension.

The parties were married for eighteen years and separated for two years before divorcing. During the marriage, the husband served in the military for nearly eighteen years. At the time that the parties signed their separation agreement military retirements were considered a “personal entitlement” not subject to equitable distribution under the U.S. Supreme Court case of  McCarty v. McCarty, 453 U.S. 210, 226-27 (1981).  Accordingly, in the separation agreement wife waived spousal support, “all interest or dower and any and all claims which [wife] has or might have for alimony and for support and maintenance or otherwise,” and her interest or rights in her husband’s property.  The parties’ separation agreement was incorporated into a final decree of divorce.  Subsequently, however, the Virginia General Assembly enacted Virginia’s equitable distribution statute, Virginia Code §20-107.3, a statute which allowed individual states to classify military retirements as either marital or separate property, and this enactment was made retroactive through June 25, 1981, the day before the McCarty decision.

Twenty-seven years later, wife filed a motion seeking equitable distribution of her ex-husband’s military retirement pay, arguing that the language in the separation agreement did not constitute a specific waiver of her interest in his military retirement. The Virginia Circuit Court judge, relying on Himes v. Himes, 12 Va. App. at 968, 407 S.E.2d at 696 (1991), held that the release and waiver of property in the separation agreement was sufficient for a waiver of interest in the husband’s retirement.

On appeal, wife argued that her waiver was not effective because it was not specific and because she could not have waived her rights to the military retirement because it was not a divisible asset until after the enactment of the USFSPA. The Virginia Court of Appeals denied wife’s claims, citing Himes: “[T]he fact that the retirement pension payments, at the time the contract was executed, may not have been considered property under McCarty, and therefore within the contemplation of the contract, nonetheless, Mrs. Himes was not entitled to any portion of the retirement benefits when the USFSPA ‘transformed’ his ‘entitlement’ into property because the terms of the contract were sufficiently inclusive to release and surrender claims to personal property ‘hereafter acquired.’ “

While wife asserted that the Court should consider the case of Nicholson v. Nicholson, 21 Va. App. at 238, 463 S.E.2d at 339 (1995) ( rather than Himes, the Court disagreed, distinguishing Nicholson as a case involving the waiver of rights to an annuity under the Foreign Service Act, 22 U.S.C. 3901, et seq. The Nicholson case, the Court stated, involved interpreting and applying a different federal statute that required an express waiver by a spouse. Here, the Court held that Himes controlled the outcome of the motion, because the property rights became vested when the parties signed the separation agreement and incorporated them into the final decree of divorce.

You should consult with your Virginia divorce lawyer concerning your rights in your spouse’s federal employment pension, annuity, or retirement benefits upon divorce.

Can a mother use the Uniform Interstate Family Support Act (UIFSA) to modify a Virginia child support order in a foreign state that is her and the children’s residence, but not the father’s?

Can a mother use the Uniform Interstate Family Support Act (UIFSA) to modify a Virginia child support order in a foreign state that is her and the children’s residence, but not the father’s?

Not in the case of Cuevas v. Cuevas, Case No. CL-2007-6974, in which the Circuit Court of Fairfax County, Virginia, ruled that the foreign state had personal jurisdiction over the father from his general appearance there, which allowed it to register, but not to modify, a Virginia child support order.

At the time of the parties divorce on August 29, 2007, the Plaintiff husband and father was a resident of Virginia, while the Defendant wife and mother was a resident of Puerto Rico with the parties’ three minor children.  Under the final Virginia divorce decree, the father was obligated to pay child support payments to the mother in Puerto Rico.

After the divorce was entered, the father moved from Virginia to North Carolina. The mother subsequently filed for a modification of the child support in Puerto Rico. The father appeared in Puerto Rico at the hearing, and the Puerto Rico court modified the child support issued by the Virginia divorce court judge.  Further, the Puerto Rico court issued an income withholding order to the father’s Virginia employer, requiring a garnishment of father’s wages for the payment of child support.   The father filed a motion to dismiss this order raising questions of whether the Puerto Rico court had personal jurisdiction over him and whether the modification was proper under Virginia’s Uniform Interstate Family Support Act (UIFSA).

The divorce court judge dismissed the father’s argument that Puerto Rico violated the federal Full Faith and Credit Child Support Orders Act contained in 28 U.S.C. Section 1738B, by registering the divorce decree in Puerto Rico without personal jurisdiction over him there.  The federal Full Faith and Credit Child Support Orders Act provides as follows:

“If there is no individual contestant or child residing in the issuing State, the party or support enforcement agency seeking to modify . . . a child support order issued in another State shall register that order in a State with jurisdiction over the nonmovant for the purpose of modification.”

The Virginia divorce court judge found that the father had submitted to personal jurisdiction in Puerto Rico simply by entering a general appearance, by appearing at the hearing on the issue of the child support modification. [A party can enter a special appearance only for the purpose of contesting the jurisdiction of the court without entering a general appearance, but father had not limited his appearance in this case.]

In addition, the father challenged Puerto Rico’s authority to modify the child support obligation under UIFSA. The appropriate code section, Section 611, establishes three criteria necessary to modify the order: “the child, individual oblige[mother], and the obligor [father] do not reside in the issuing State [Virginia]; a petitioner [mother] who is a nonresident of this State [Puerto Rico] seeks modification; and the respondent [father] is subject to personal jurisdiction in the tribunal of this State [Puerto Rico].” ().  [While a support order may also be modified under Section 613 of the Act, all the parties must be residents of the same state, and the child must not be a resident of the issuing state.  See Virginia Code Section 20-88.77:1.   In this case, the mother could not satisfy the second requirement under Section 611 of the UIFSA, as she was a resident of Puerto Rico. The court held that, as in the case of Van Dyke v. Van Dyke, 50 Va. Cir. 604, 612 (1998), the mother could not use the Uniform Interstate Family Support Act to modify a support order from a different state to her benefit in her home state.  Consequently, the Virginia Circuit Court judge dismissed the income withholding order.

You should with a Virginia family law attorney concerning the applicability of the Uniform Interstate Family Support Act to your situation.

Do husband’s transfers of his separate property into jointly-titled property with his wife create marital property subject to equitable distribution by transmutation in Virginia?

Do husband’s transfers of his separate property into jointly-titled property with his wife create marital property subject to equitable distribution by transmutation in Virginia?

Not in the case of  William E. Jones v. Donna M. Jones, Record No. 2428 (2009), where, in an unpublished opinion, the Court of Appeals of Virginia reversed the Circuit Court’s holding that the assets were gifts to the wife, ruling that the wife had not met her burden of proving donative intent by clear and convincing evidence.

The first step in equitable distribution in a Virginia divorce case is classifying all property of the husband and wife as separate, marital, or hybrid – part marital and part separate.  Under Virginia Code Section 20-107.3(A)(3)(f), a divorce court judge can find marital property by the process of transmutation: “When separate property is retitled in the joint names of the parties, the retitled property shall be deemed transmuted to marital property. However, to the extent the property is retraceable by a preponderance of the evidence and was not a gift, the retitled property shall retain its original classification.”

The husband in Jones alleged that the divorce court judge erred by finding that a jointly titled investment account and a parcel of Virginia real property titled as tenants by the entireties were gifts to his wife and, consequently, marital property subject to equitable division. Furthermore, the husband contended the court incorrectly concluded that an automobile titled in their joint names was marital property.

The husband and wife had a marriage of short duration with no children.  The husband was considerably wealthier than wife and developed severe health problems.  He testified during the equitable distribution portion of the divorce case that he put assets into the parties’ joint names for estate planning or insurance purposes.

In presenting his case, the husband argued he never intended to give either the bank account or the real property to his wife. He asserted he only wanted his wife to take care of his health issues by giving her access to the bank account, and he intended for his wife to sell the real property and distribute the funds to his children if he died. Furthermore, he testified that he bought the automobile so his wife could commute to her job in Washington D.C., but he did not give it to her because she failed to meet his condition of giving her vehicle to his son.

According to the Virginia Circuit Court judge, the wife established that the husband’s joint titling of the property signified valid inter vivos gifts to the wife. By assuring her, “This is your property” and “[this] would be ours,” the husband established a pattern of giving, which the lower court stated “was for the purpose of persuading her that she was his wife and he was going to share with her.” However, the Virginia Court of Appeals reversed this holding after reviewing the record of evidence on appeal.

As the Court of Appeals noted, the standard of review for reversal is high, and because a classification of property involves a determination of fact, the trial court’s determination could only be reversed if it was “plainly wrong or without evidence to support it”,  citing the unpublished case of Ranney v. Ranney, 45 Va. App. 17, 31-32, 608 S.E.2d 285, 492 (2005).  Here, the Court recognized that a gift requires a “voluntary transfer of property to another without compensation.” Black’s Law Dictionary 709 (8th ed. 2004). Moreover, the Virginia Court of Appeals affirmed that retitling property, in and of itself, does not create the presumption of a gift. Utsch v. Utsch, 266 Va. 124, 128, 581 S.E.2d 507, 50 (2003).  Although wife’s testimony was consistent with joint ownership, that she had access and use of the assets, her testimony did not establish donative intent.  Therefore, the party trying to establish a gift must prove by clear and convincing evidence the following elements: 1) the intention on the part of the donor to make the gift; 2) delivery or transfer of the gift; and 3) acceptance of the gift by the donee. Robinson v. Robinson, 46 Va. App. 652, 665-66, 621 S.E.2d 147, 153 (2005).  In Jones, the Court of Appeals determined that the wife’s testimony only supported a finding of jointly held property, which does not lead to the finding of a gift. Therefore, the Court revered the trial court’s findings and remanded the case to determine an equitable distribution of the assets based on the record.

You should consult with a Virginia divorce lawyer to discuss whether your property might be considered separate property, marital property, or hybrid property in equitable distribution.

Can wife claim a homestead exemption in bankruptcy in property titled solely in husband’s name because it might be considered marital property under Virginia’s equitable distribution statute?

Can wife claim a homestead exemption in bankruptcy in property titled solely in husband’s name because it might be considered marital property under Virginia’s equitable distribution statute?

Not in the case of In re Wilkinson, 100 B.R. 315 (Bankr.W.D.Va. 1989), where the United States Bankruptcy Court for the Western District of Virginia held that the wife could not exempt an interest in assets titled in husband’s name because the property might be considered marital property subject to equitable distribution under Virginia Code §20.107.3.

In Wilkinson, the trustee filed an objection to the debtors’ claimed exemptions, arguing that wife had no exemptable interest in the property.  Under Virginia’s Homestead Exemption, Va.Code. Ann. §34-4, both parties must have an interest in the property in order for each to claim an exempt interest. (See Boswell v. Lipscomb, 177 Va. 309, 314, 14 S.E.2d 305, 307 (1941).  The bankruptcy court judge in Wilkinson examined whether the parties considered the property in which wife claimed an interest as joint or separate.  Husband testified although he owned the assets prior to the marriage, he and Wife both treated it as joint “money in the bank,” selling the property when appropriate to obtain cash for their marital needs.

The debtors argued Va. Code §20.107.3 applies in this context, and they claim by filing the homestead deed, they made a statement that they considered the property as marital property. Moreover, the husband and wife contended the principles of equitable distribution in a divorce proceeding would establish the property as joint marital assets because if Wife could obtain an award of equitable distribution under §20.107.3, then they should be allowed to claim the exemption under §34-4.

While the court recognized joint property requires an express agreement to transmute it into separate property, it held the same principle did not apply to the reverse: separate property can be transmuted into joint assets without express assent. (See Wagner v. Wagner, 4 Va.App. 397, 404, 358 S.E.2d 407, 410 (1987).  Therefore, as established by the Supreme Court of Virginia in Smoot v. Smoot, 233 Va. 435, 442, 357 S.E.2d 728, 731 (1987), parties can transform property into marital property by agreement or through affirmative acts. (See also Westbrook v. Westbrook, 5 Va.App. 446, 453, 364 S.E.2d 523, 528 (1988).

In determining whether the exemption applied, however, the bankruptcy court judge recognized the language of the code section required examining the legal title, granting rights and interests only after establishing the proper titleholder.  (See Brinkley v. Brinkley, 5 Va.App. 132, 136, 361 S.E.2d 139, 140 (1987).  Although the Wilkinsons alleged the code would permit Wife to obtain property interests if they divorced, the court rejected that argument, holding that the code section established the court’s power only to divide or transfer jointly titled property.  The court noted that Virginia Code Section 20-107.3(B) did not alter legal title to property subject to equitable distribution:

“For the purposes of this section only, both parties shall be deemed to have rights and interests in the marital property. However, such interests and rights shall not attach to the legal title of such property and are only to be used as a consideration in determining a monetary award, if any, as provided in this section.”

The bankruptcy judge noted that Virgina Code Section 20-107.3 (C) similarly did not empower the divorce court judge to alter the legal title to property, but instead make a monetary award:

“…the court shall have no authority to order the division or transfer of separate property or marital property which is not jointly owned. The court may, based upon the factors listed in subsection E, divide or transfer or order the division or transfer, or both, of jointly owned marital property, or any part thereof…As a means of dividing or transferring the jointly owned marital property, the court may transfer or order the transfer of real or personal property or any interest therein to one of the parties, permit either party to purchase the interest of the other and direct the allocation of the proceeds, provided the party purchasing the interest of the other agrees to assume any indebtedness secured by the property, or order its sale by private sale by the parties, through such agent as the court shall direct, or by public sale as the court shall direct without the necessity for partition.”

Because wife did not share title and have joint interest in the property with husband, the wife could not claim the property as exempt under §34-4.  Therefore, the court sustained the trustee’s objection and held the property could be subject to creditors’ interests.

You should consult with your Virginia bankruptcy lawyer concerning your rightful exemptions in bankruptcy.

Will the bankruptcy court allow an adversary proceeding by children against the parents for breach of fiduciary duty after the equitable distribution of the subject property in a Virginia divorce case?

Will the bankruptcy court allow an adversary proceeding by children against the parents for breach of fiduciary duty after the equitable distribution of the subject property in a Virginia divorce case?

In Spreadbury v. Spreadbury AP No: 09-1254 (Bkr. EDVA, 2010), the United States Bankruptcy Court for the Eastern District of Virginia, Alexandria Division, allowed a claim for breach of fiduciary duty to proceed by denying a motion to dismiss and a motion for summary judgment by the children’s father, holding that the children’s claim stated a genuine issue of material fact, the relevant standard under Fed.R.Civ.P 56(c) and Fed.R.Bankr.P.7056.

In Spreadbury, the initial action began on July 21, 2008, when the wife filed a voluntary Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Eastern District of Virginia, Alexandria Division.  The children filed proofs of claim for five million dollars in her bankruptcy case.  The debtor wife  listed her most significant asset as a house and 100-acre real estate parcel at 1749 Atoka Road, Middleburg, Virginia, an asset referred to as “Westbury Farm”.  According to her bankruptcy petition, the debtor valued the property at $4,655,900 subject to a deed of trust for $1,027,023.  Concurrently, the debtor wife and her husband had a divorce action pending for approximately four years in a Virginia Circuit Court.  After the bankruptcy court judge lifted the automatic stay to allow equitable distribution to proceed in the state court, a final order of divorce was entered and the husband and wife’s separate interests in the marital estate were calculated at 65% for the husband and 35% for the debtor wife, respectively.  Equitable distribution by the Virginia Circuit court was made subject to review by the bankruptcy court and the order permitting relief from the automatic stay.

During the pendency of the divorce, the four children of the debtor wife and husband sought to intervene in their divorce case, but were rebuffed by the divorce court judge on the grounds that they needed to file a separate action. Three days prior to the debtor wife’s bankruptcy filing, the children filed suit against the debtor mother and their father seeking over $5 million dollars in damages for breach of fiduciary duty. Furthermore, the children filed probate court proceedings in Connecticut, where both the trust was created and where their father resided. The Fauquier Circuit Court stayed the action by the children in Virginia to allow the case in Connecticut to proceed.   The children filed proofs of claim and an adversary proceeding for breach of fiduciary duty in the wife’s Virginia bankruptcy case.  All of the parties agreed that the Virginia Bankruptcy Court was the most appropriate forum for resolving their dispute.

The case concerned the creation of the three trusts, a family trust, the children’s trust and the parents’ trust, and how the parents as trustees managed the assets of the children’s trust.  On September 21, 1990, the parents created an irrevocable family trust, referred to as the “children’s trust,” which named the debtor wife, the husband, and the four children as donors.  At that time, the husband, the debtor and two other persons were designated as trustees and only these trustees’ signatures appear on the trust instrument, not the donors’. The parties did not dispute that each of the children contributed $42,328 to the purchase of Westbury Farm.  Under the terms of the family trust, the parents would receive an income interest for the shorter of their joint lifetimes or twenty-two years, with the remainder interest vesting in the living children and the issue of any deceased children in September 2012.  However, before their interests expired, the parents had the responsibility to bear “all of the expenses, taxes, and costs attributable to the joint and survivor outcome interests.”

The actual title to Westbury Farm was held by a second trust created by the husband/father, naming the husband/father as the sole trustee and the children’s trust as the beneficiary.  Eight years after the institution of these two trusts, the realty trust with the consent of the debtor wife and husband, entered a lease and purchase option for Westbury Farm with a third trust—the parents’ trust, a trust naming the husband and wife as sole beneficiaries during their joint lifetimes. The lease on the parents’ trust named a term of 99 years at $1.00 per year, providing an option to purchase the property for $1,750,000 at any time.  In August 1999, the parents’ trust exercised the purchase option and executed to the children’s trust a $340,000 promissory note bearing interest at 7% payable in annual interest installments, with the principal due in 30 years. Although the note states it was to be secured by a deed of trust, no such instrument was recorded, and it was not determined how the amount of $340,000 was calculated.  With the consent of the husband and the debtor wife as trustees, the beneficiary of the children’s trust changed to the parents’ trust, and on November 19, 2003, the husband executed a deed conveying the property into the name of the parents’ trust. According to the children in the complaint, they had no knowledge of the lease, the purchase option, or the beneficiary change, and they had not provided consent.

The children argued in their complaint that the parents breached their fiduciary duty and engaged in self-dealing by consenting to the 99-year lease and purchase option for the parents’ trust, exercising the purchase option and proving an unsecured $340,000 promissory note (on which no payment have been made); changing the beneficiary of the realty trust; accepting the $340,000 note as adequate compensation; and conveying title of the property to the parents’ trust. After discussion, the Court held that the children’s cause of action was valid and should not be dismissed; therefore, the parents could be liable for their mismanagement of the children’s trust.

You should consult with your Virginia bankruptcy and divorce lawyer concerning competing interests in property subject to equitable distribution and bankruptcy.

Can wife’s student loan be considered marital debt in a Virginia divorce?

Can wife’s student loan be considered marital debt in a Virginia divorce?

Yes, according to Dyne v. Dyne, decided by the Roanoke County Circuit Court in the Commonwealth of Virginia, a student loan incurred during the marriage and before the separation for the benefit of both parties can be considered joint marital debt for purposes of the allocation of debt in equitable distribution.  In addition, the Virginia divorce court judge held that wife’s payments of the mortgage for the marital residence until it could be sold would be equally distributed along with the small profit from the sale of the home, husband’s share in the form of a small credit against his large debt to wife.  Had wife allowed the house to go to a foreclosure auction resulting in a large deficiency, the parties may have been left with few options other than bankruptcy to discharge the debt.

In Dyne, the wife argued her educational loans of $12,117.11 to become qualified to teach school in Virginia should be considered marital debts to be split with the husband.  She claimed she incurred theses loans after the parties agreed that her future income as a teacher would provide a stable income and retirement benefits for the family.

Relying on the standards enunciated by the Supreme Court of Virginia in Gilliam v. McGrady, Record No. 090958 (April 15, 2010), discussed herein in answer to the question, “Is debt incurred during the marriage presumed to be marital debt?”, the divorce court judge found that the wife, as the party seeking distribution of the debt, had met her burden to prove the debts incurred in her individual name were in fact hybrid debts.  In this case, the Court determined the educational debts were part marital and part separate debt: the wife had borrowed a portion of the money ($2,815.46) following the parties’ separation, but the remainder of the debt ($9,301.65) had been incurred during the marriage with the consent of both parties.  Thus, the Court ruled that the debt acquired prior to the separation was considered marital debt to be split between the husband and wife.

In addition to the educational loan distribution, the Virginia Circuit Court ruled on the debts related to the marital residence.  While married, the husband had been abusive to his wife, making repeated threats to kill himself or his wife and child.  As his behavior continued to escalate, the wife sought divorce and obtained an injunction requiring her husband to vacate the marital residence.  The husband blatantly defied the order, changed the door locks, and placed all of the furniture in storage, making it uninhabitable for the wife and child. Because the wife and child could not live in the martial residence, they resided for two years in a furnished apartment.  While living in the apartment, the wife alone continued to make payments on the marital home without any contribution from the husband, borrowing $23, 679.16 to remain current on the mortgage, utilities, and repairs.  Later, the house sold for a profit of only $929.47, which was held in escrow.

The husband alleged he should not have to share these expenses and claimed that the wife and child could have lived in the premises.  Furthermore, he contended that he should be paid one-half the rental value of the house while it remained vacant.  The divorce court judge refused to consider these arguments.  The wife argued that the debts should be shared, because the husband knew that he had forced the property to become uninhabitable, and her payments for the continued upkeep of the house allowed it to sell at a profit.

Considering the factors of Virginia Code §20-107.3(E), the Court held that the sale proceeds and the marital debts should be divided equally.  The Court also held that all of the real estate proceeds should be paid to the wife, and the husband would be granted a credit of $464.73 against the debt, leaving the balance to be paid to the wife at $15,936.05.

You should consult with your Virginia divorce lawyer to discuss how your debts may be treated in equitable distribution.

Must a divorcing husband and wife share the deficiency from a foreclosure sale of the marital residence in Virginia?

Must a divorcing husband and wife share the deficiency from a foreclosure sale of the marital residence in Virginia?

Yes, in the case of Austin v. Austin (Case No. CL08-1673, June 21, 2010), the Roanoke County Circuit Court found that the parties incurred the debt jointly, and, thus, the deficiency debt from the sale of the former marital residence was marital debt and should be divided equally.  In addition, as the wife had earning ability that her husband did not, and Court ruled the wife should pay spousal support to the husband.  The court also stated, given the amount of marital debt, that “[b]ankruptcy appears to be a consideration for each of them.”  The Austin case stands in contrast to the Reidy case discussed earlier, where the Loudoun County Circuit Court refused to equitably divide marital debt resulting from an overmortgaged house, as discussed in answer to the question, “ Would a Virginia divorce court order a couple to allow the former marital residence to go to foreclosure?”.

In Austin, the husband and wife were married in Virginia for seventeen years before separating.  Ten years into the marriage, the husband began suffering serious health problems, including kidney and heart problems.  Shortly before the divorce, the husband was completely disabled, living on spousal support, Social Security, Medicare, and gifts from his family.  He sought a no-fault divorce, spousal support, and a monetary award under Virginia’s equitable distribution section, Virginia Code § 20-107.3, arguing that the wife had squandered money for her own purposes, placing him in an economic hardship because she continued to borrow money against their jointly owned home during the marriage to pay off her separate credit card debts.  Under Virginia Code §20-107.3, the Virginia Circuit Court judge has the power, upon granting a divorce, to make a monetary award to one party from the other for the purpose of creating an equitable distribution of the marital assets.  Under the husband’s interpretation of the facts, he alleged he was entitled to the receipt of this award, because his family had placed significant equity in the marital home, and, due to the wife’s irresponsibility, he lost his potential share of the profit from their home.

The wife’s testimony, however, presented a different story.  She claimed the parties never pooled their income. While her husband paid half of the house note and some food expenses, she bought most of the household furnishings, clothing, vacations, and the swimming pools installed at both their first and second homes—purchases made on her credits cards, because her husband had bad credit. Moreover, she contended that her husband wasted his money on alcohol and crack cocaine, and his habits exacerbated his medical conditions and contributed to his body’s rejection of a donated kidney.

Upon examination of the parties’ testimonies, the Court found that both husband and wife spent beyond their means, jointly and separately, throughout the marriage.  The divorce judge found that the standard of living established during the marriage was beyond the parties’ economic means.  The wife was employed as a social worker in her brother’s business supporting disabled individuals, and in that position, she earned only about $48,000 per year when the parties separated. Following the marriage, the wife has incurred $60,000 in unsecured debt, and the husband has a debt of approximately $25,000, making them both candidates for filing for bankruptcy.   The court noted that bankruptcy appeared to be a consideration for both parties.

The Court in Austin v. Austin also ruled on the issue of spousal support, finding that the wife owed the husband monthly support.  Although the each of the parties alleged that the other had committed adultery, the claims were not proved.  The Virginia Circuit Court judge, however, ordered support for the husband because he lived on income from his disability without any earning potential, while the wife had a college education, earned a decent living wage, and was in good physical condition.  Moreover, because of both parties’ excessive spending, the Court, after considering the equities established in Virginia Code §20-107.1 (E) determined an appropriate budget and found the wife had the ability to pay support for her husband.

You should consult with your Virginia bankruptcy and divorce lawyer concerning whether a mortgage deficiency should be divided between the parties.

Is a purported settlement agreement signed by the parties’ attorneys but not by the parties themselves binding in a Virginia divorce proceeding?

Is a purported settlement agreement signed by the parties’ attorneys but not by the parties themselves binding in a Virginia divorce proceeding?

No.  In Jordan v. Jordan, Civil Action: CL09000213-00, the Hanover County Circuit Court ruled that Virginia Code §20-149 required that such agreements must “be in writing and signed by both parties” and that the plain meaning of the statutory language should apply.

In Jordan, the husband argued that the agreement should be considered invalid under Va. Code §20-155 and §20-149.  While Va. Code §20-150 allows for parties to create such agreements in order to properly distribute assets upon a marital dissolution, Virginia Code §20-149 stipulates that these agreements must “be in writing and signed by both parties.”  In Virginia Code §20-155, however, the statute states, “If the terms of such agreement are (i) contained in a court order endorsed by counsel or the parties or (ii) recorded and transcribed by a court reporter and affirmed by the parties on the record personally, the agreement is not required to be in writing and is considered to be executed.”   The consequences of this particular code section are explored in more detail in to the “Authorized Case Study: Contempt of Court” post in this blawg.  Because the appellate courts of the Commonwealth of Virginia had not ruled on the issue of whether an attorney’s signature would suffice in the place of a client’s signature on a settlement agreement, Jordan involved a case of first impression before the Hanover County Circuit Court, and this issue of statutory interpretation became the deciding factor in the court’s analysis.

Both the husband and wife in Jordan did not dispute that the agreement had not been read into the record nor had a mutually endorsed court order been presented.  However, the parties’ attorneys had signed a “term sheet,” a loose accumulation of the attorneys’ negotiations of the equitable distribution of the assets and the terms of spousal support. Relying upon the Court of Appeals’ decision in Gaffney v. Gaffney, 45 Va. App. 655, 613 S.E.2d 471 (2005), the Hanover County Circuit Court judge agreed that the General Assembly intended to use Va. Code §20-155 to displace the common law principles of agency that would have endowed the agent with the authority of the principal. Based on the language of Watkins v. Hall, 161 Va. 924, 930, 172 S.E. 445, 447 (1934) see also Barr v. Town & Country Properties, 240 Va. 292, 295, 396 S.E. 2d 672, 274 (1990), the Court determined that the plain language of the statute should serve as binding on the court, and the official procedures of the Code Section meant the clients’ attorneys could not sign the agreement and have it be enforceable against the parties in this case.

You should consult with your Virginia divorce lawyer concerning whether any alleged agreement may be binding upon you.

 

Can an ex-wife enforce an affidavit of support against her debtor ex-husband in bankruptcy court after the state divorce court has already terminated spousal support?

Can an ex-wife enforce an affidavit of support against her debtor ex-husband in bankruptcy court after the state divorce court has already terminated spousal support?

No, the United States Bankruptcy Appellate Panel, of the First Circuit ruled in the case of  In re Schwartz, Bankrupty No. 06-13696 WCH (August 26, 2008), an appeal from the United States Bankruptcy Court for the District of Massachusetts. The Appellant ex-wife, who was a citizen of Israel, and the Appellee ex-husband had been married in 1996. In order to obtain permanent resident status for his foreign-born wife, the husband filed the required Form I-864 Affidavit of Support (“Affidavit of Support”), with what was then the Immigration and Naturalization Service (now the United States Citizenship and Immigration Service under the Department of Homeland Security) as his wife’s sponsor, promising to support his wife at a level above 125% of the federal poverty guidelines, and to reimburse the government should she ever fall below that level and become a public charge, subject to termination upon certain conditions, not including divorce. On January 6, 2003, the wife filed for divorce from the husband in Oklahoma state divorce court. On December 18, 2003, the Oklahoma State Court issued a Decree of Divorce allocating the assets and liabilities of the parties and terminating the husband’s obligation to support the wife as of June 1, 2004.

In Schwartz, the wife made a motion for reconsideration of prior order dismissing her adversary proceeding to enforce the Chapter 7 debtor ex-husband’s support affidavit and for a determination that his obligations thereunder were nondischargeable.   The bankruptcy court judge had dismissed the adversary proceeding for lack of subject matter jurisdiction.  On appeal, the United States Bankruptcy Appellate Panel ruled that the Bankruptcy court did not err by dismissing the proceeding, where ex-wife’s (Appellant’s) cause of action was barred by Rooker-Feldman doctrine or by res judicata effect of state divorce court’s prior judgment. Furthermore, ex-wife presented no newly discovered evidence, but simply sought to rehash prior arguments. 11 U.S.C.A. § 523(a)(5);   Fed.Rules Civ.Proc.Rule 59(e);  28 U.S.C.A 1334.

If the Affidavit of Support had been considered by the state divorce court judge in rendering its decision to terminate support, then the wife’s claim in bankruptcy court was barred by the Rooker-Feldman  doctrine, which prohibits lower federal courts, including the United States Bankruptcy Courts, from reviewing final state court judgments.  On the other hand, if the Affidavit of Support had not been submitted in the divorce proceedings, the wife’s claim was nevertheless barred under the doctrine of res judicata , which “prohibits all parties and their privies from relitigating issues which were raised or could have been raised in a previous action, once a court has entered a final judgment on the merits in the previous action.” The First Circuit Bankruptcy Appellate Court affirmed the bankruptcy court’s dismissal on reliance on the Rooker-Feldman doctrine (Rooker v. Fidelity Trust Co. (1923) 263 U.S. 413 (Van Devanter) ; D.C. Court of Appeals v. Feldman, 460 U.S. 462 (1983).

You should consult with your Virginia bankruptcy or divorce lawyer concerning the possible application of the Rooker-Feldman doctrine to your contemplated litigation of family law matters in bankruptcy court.

Can an individual Chapter 13 bankruptcy debtor strip off a second mortgage on nonresidential property owned by the debtor and his wife as tenants by the entireties?

Can an individual Chapter 13 bankruptcy debtor strip off a second mortgage on nonresidential property owned by the debtor and his wife as tenants by the entireties?

Not in the case of In re Hunter, 284 B.R. 806 (Bkrtcy.E.D.Va.,2002), where the United States Bankruptcy Court for the Eastern District of Virginia ruled that Chapter 13 debtor could not strip off a wholly unsecured, second-priority mortgage lien on non-residential real property owned by debtor and his nondebtor wife as tenants by the entireties.

In Hunter, the debtor filed an individual Chapter 13 petition in bankruptcy court and his wife did not join in the petition or file her own. Prior to confirmation of the plan, the debtor filed an adversary proceeding against creditor, seeking to avoid the second priority mortgage lien under 11 U.S.C. § 506(d) on real property in Pennsylvania that was not the marital residence.  The bankruptcy court judge addressed whether an individual debtor may avoid a lien, whether partially or wholly unsecured, on tenants by the entireties property, without his or her spouse. The court found no Fourth Circuit Court of Appeals precedent relating to either stripping off wholly unsecured mortgage liens in Chapter 13 or stripping off or stripping down undersecured mortgage liens on a debtor’s real property that is not the debtor’s primary residence.  The bankruptcy judge reviewed Pennsylvania’s law, where the subject real property was located, on tenancies by the entirety and found no basis for such relief.  Under Pennsylvania law, just as in Virginia, property held as tenants by the entireties is owned per tout et non per my, that is, each holds an undivided and indivisible interest in the entire property; neither spouse may unilaterally sever an estate held in the entireties.  A tenancy by the entireties is based on the legal fiction that a husband and wife are a single legal person.  As discussed in answer to the question, “Is my Virginia real estate vulnerable to creditors when I divorce?”, a tenancy by the entireties has a number of advantages over a tenancy in common for a married couple, including the right of survivorship, protection from creditors of one spouse alone, and the inability of either spouse to convey his or her interest without joinder of the other spouse.

In Hunter, the Bankruptcy Code provisions did not expressly support the debtor husband’s position, as noted by the Court:  “The only provision permitting the severance of an entireties estate or a unilateral action by one co-tenant is Bankruptcy Code Section 363(h). This provision expressly provides that the “trustee may sell both the estate’s interest” and the co-owner’s interest. There is no authority for the debtor to sell the property under § 363(h). See, Hartford Underwriters Ins. Co. v. Union Planters Bank, N.A, 530 U.S. 1, 7, 120 S.Ct. 1942, 1947, 147 L.Ed.2d 1 (2000). Such a unilateral action is contrary to the essence of the tenants by the entireties estate and should not be permitted absent clear legislative authority.”

The court noted that the debtor sought to provide his spouse with the benefit of having filed bankruptcy without her having borne the burden of a bankruptcy filing.  The Debtor husband sought severance of a portion of the entireties estate when his wife’s interest was in the whole of the property, per tout et non per my, and Pennsylvania law envisioned neither such a division of a tenancy by the entireties estate nor the unilateral severance of any portion of the entireties estate.

You should consult with a Virginia bankruptcy attorney regarding how your interest in tenants by the entirety property will be treated in bankruptcy.