Kentucky Bankruptcy Law

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Misconduct in the dissipation of marital assets can be considered in property division / Maintenance

In the recent Kentucky Court of Appeals case, Lawson v. Lawson, 2004-1077-MR (2007, to be published) , the husband, John Lawson, was left responsible for the deficiency balance of $100,000 after the foreclosure of the marital residence. John had been ordered to pay the mortgage payments during the pendency of the divorce because of the disparity in income between he and his then wife, Barbara. Dear John lost his job, however, after failing a mandatory drug test. John subsequently stopped making the payments. The Court of Appeals stated:

    In dividing marital property, including debts, appurtenant to a divorce, the trial court is guided by Kentucky Revised Statute (KRS) 403.190(1), which requires that division be accomplished in “just proportions.” This does not mean, however, that property must be divided equally. Russell v. Russell, 878 S.W.2d 24 (Ky. App. 1994); Wood v. Wood, 720 S.W.2d 934 (Ky. App. 1986). It means only that the division should be accomplished without regard to marital misconduct and in “just proportions” considering all relevant factors. Brosick v. Brosick, 974 S.W.2d 498 (Ky. App. 1998). “Misconduct” relative to the dissipation of assets, however, is not marital in nature and may be considered. Id

The Court cited John’s failed drug test as his misconduct. It also notes that John failed to show up, offer any testimony, or otherwise attempt to inform the court of his job loss. Because he stopped paying the mortgage and because this failure was tied to job loss for drug use, he was left responsible for the $100,000 deficiency when the house was foreclosed on and auctioned. The mistake of the drug use might have been mitigated in some way had John not also made the mistake of ignoring the court proceedings.

Ah, but not all was lost for our Dear John. The trial court ordered that Barbara was due one-half of any award John might get as a result of his wrongful termination suit against his employer. The Court of Appeals reversed this stating:

    because John has not yet received any damage award pursuant to his wrongful termination claim, and further because of the speculative nature of any such award and its characterization, the trial court lacked a sufficient basis for deeming as marital property any and all future proceeds John may realize. Thus, we are compelled to reverse that portion of the March 11, 2004 awarding Barbara one half of any judgment awarded to John. Of course, if, at some point in the future John is successful and receives a monetary judgment against his former employer, the trial court is certainly free to revisit this matter for an appropriate determination at that time.

If he ever is successful, any damages that could be attributed to compensatr for lost income that would have been earned during the time the divorce was pending would arguably be marital and subject to division.
This case has one last significant bit of wisdom to offer. John had been making three times as much earned income as Barbara before losing his job and the trial court awarded him maintenance. The maintenance was $2,500 per month for five years. This was reversed and remanded to the trial court for reconsideration because:

    According to KRS 403.200(2)(f), one of the factors that a trial court must consider when deciding whether to award maintenance is “[t]he ability of the spouse from whom maintenance is sought to meet his needs while meeting those of the spouse seeking maintenance.” Because we cannot determine whether the trial court addressed this, we must reverse the March 11, 2004 decree to the extent that it orders John to pay maintenance of $2,500.00 to Barbara and remand for a new determination in accordance with all of the elevant factors as required by KRS 403.200(2).

If Dear John remained unemployed, Barbara will probably no longer receive any maintenance. This reaffirms the one consistency in the practice of divorce law. No one ever walks away with everything they wanted or believe they deserved. While Barbara escaped responsibility for a share of the $100k debt, she likely will lose out on the $30,000 in maintenance she had been awarded.

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June 24, 2007 - Posted by | Divorce

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