A frequent issue in New Jersey Family Law matters involving alimony and child support arises when a party has a reduction in income prior to, or during, divorce proceedings or post-judgment litigation. The income reduction may be alleged by the support payor or recipient. In either event, an argument often made in response to the allegations of a reduction of income is that the Court should impute an income level based upon that party’s earning capacity.
New Jersey Courts have determined that when a party becomes voluntarily underemployed or unemployed without just cause, the alimony or child support determination will be based upon that party’s historic level of income. Alternatively, the determination could be based on published data on prevailing wages, such as the Occupational Employment Statistics Wage Survey published by the New Jersey Department of Labor and Workforce Development. When a Court finds that a party has intentionally reduced his/her income, the Court’s decision to impute a higher level of income will be upheld by an Appellate Court if the imputed level of income is based upon reliable data.
Another circumstance when a Court will impute a higher level of income to a party is when the financial information produced by a party is insufficient for a Court to make a finding of income consistent with that party’s allegations. In other words, in cases where the party’s financial circumstances are complex or if there should be a substantial year-to-year variance in that party’s income, unless that party provides sufficient financial information for the Court to determine that party’s earning capacity, the Court is likely to impute a level of income based upon either an average income over a number of years or reliable published data. Importantly, a party’s actual income in a given year is not the basis for determining the amount of alimony or child support. Rather, the party’s earning capacity is the appropriate measure for calculating support obligations.
Accordingly, if a party contemplating a divorce or modification of an existing support obligation is concerned that the other party has reduced his/her income or has extremely complex financial circumstances, experienced matrimonial counsel should provide the potential solution to that concern by arguing that the Court may provide an appropriate alimony or child support Order through the imputation of income.
Also, a party who has suffered a reduction in income, should question his/her counsel as to how to best persuade the Court to accept the representations of earning capacity based upon proofs that the reduction of income was involuntary. Further, during consultation with counsel, a party who has complex financial circumstances involving a substantial variation of income on a year-to-year basis or through multiple business entities, should question how the financial information can best be explained to the Court either through the assistance of a forensic expert or in other ways to demonstrate that the represented level of income is genuine.
In either case, it is advised that a party seek counsel at the earliest possible time following either a spouse’s reduction in income, his/her own reduction in income or in cases involving either party’s variable income.
Barry Chatzinoff, Esquire has been representing South Jersey residents in Matrimonial and Family Law matters for more than 30 years.
Law Office of Barry Chatzinoff, P.C.
120 Haddontowne Road, Cherry Hill, NJ 08034