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Main Forums => Child Support Issues => Topic started by: Ref on Oct 20, 2006, 07:38:54 AM

Title: Could someone help me understand soc's reponse to
Post by: Ref on Oct 20, 2006, 07:38:54 AM
my post on his page?

What does he mean "think out of the box"?

Any suggestions?

Ref :-(
Title: JMHO
Post by: 4honor on Oct 20, 2006, 10:54:55 AM
I think that what he is saying is that to be successful in court you will PROBABLY end up spending more on experts (because the paperwork you are proposing will intimidate the mathless wonder, er, umm Judge) to win this than the actual CS would be to just pay. He suggests you negotiate in good faith for something other than what the Ex is asking, but something more than what you are asking. Neither you nor the ex win, but at least the lawyers don't.

He has suggested you stipulate tothe hgher amount asked by the ex with the condition that there will be an accounting and a refund at the end of the year (or an increase with arrears depending on the outcome.)

OR

He also suggested a percentage of your income to be sent at every distribution (you could structure it to be an after tax percentage.) You can also place in the paperwork that when the business is 24 months old, that you are to modify the CS and use state guideline based on your income over the 24 months.

Either of these has possibilities for reduction or increase within the year, but at least the percentage will give you more of a handle on your income.

You as a business owner cannot effectively win a downward modification because there is too much suspicion by the courts of this finanical arrangement. So you should make the best compromise you can.
Title: I guess we are SOL then.
Post by: Ref on Oct 20, 2006, 11:28:05 AM
DH actually file for a decrease after he lost his job. He had no idea that this opportuntity would come about.

Court is in less than 2 weeks. CS runs for less than 3 years from now.

Any suggestions from the peanut gallery?

Ref
Title: RE: Could someone help me understand soc's reponse to
Post by: Stirling on Oct 20, 2006, 11:29:56 AM
I think Soc. is trying to tell you that you need to get creative in your approach and arguments in order to support your case.  

If I understand your situation correctly you started a new business at the beginning of the year which initially generated significant income.  Currently, the business is not generating as much income.  Your concern is that a pending CS modification will result in an over-stated CS award based on the beginning of the year profits.


I don't know the details of your business, but here are a few arguments that you could use if the fact pattern is there to support your case.  First is what Soc. suggested, that you gather support to show that your business is cyclical.  That given the nature of the business you make more money in the beginning of the year and less at the end of the year.

You could also try to make a case that the beginning of the year profits were extraordinary and non-recurring in nature.  That it was a one time event and the end of the year profits is a more realistic expectation of what your future income will be.

As Soc said you will probably need some kind of expert to testify in order for your arguments to have credibility with the judge.  

I agree with Soc when he said that judges/attorney don't like math.  This is why the will give credibility to an expert financial witness.  It is also why a judge may lean towards just annualizing your year to date income for the year and use that in the CS calculation since it is simple to do and is based on a lodgic the judge can understand.  Again you have the burdan of proof to show that annualizing your year to date income will distort the CS calculations.  You need to prove what a realistic expectation of your future recurring income will be.

If your new business is so volitile that a reasonable projection of your future recurring income is not possible then you should consider, as Soc. suggested, to cut a deal with your Ex which deviates from the guidelines.  Soc. suggested to base CS as a specific percentage of your actual earnings.  Again get creative here in trying to come up with a compromise that everyone can live with.

Good Luck!!!
Title: RE: I guess we are SOL then.
Post by: Stirling on Oct 20, 2006, 11:31:23 AM
Can you withdraw your pition for a CS reduction, or has the CP filed for a modification as well?
Title: No deals...too late
Post by: Ref on Oct 20, 2006, 12:38:07 PM
He can't withdraw. BM, in a completely spiteful move filed for 2 contempts and a modification on visitation. All of these things that she filed for are easily proven that she is lying. We have EVERYTHING in her own handwriting in a very explicit nature.

We just have to deal with it.

Thanks
ref
Title: Actually...
Post by: Ref on Oct 20, 2006, 12:48:16 PM
DH's business started in January 2006 after he was laid off the October before.

He didn't get a distribution until April 2006 and the last one Dh received was in August. What Dh's lawyer is saying is that the judge will take the total distributions and divide them by 5 months instead of the 10 months to get the monthly amount.

Dh just received a small distribution in October, so maybe this will move the judge to 7 months.

I am not sure why the judge would figure out a monthly amount in a way other than speading the distribution amount over the whole time the business has been running, but this seems to be what the lawyer and Soc is saying.

And any compromise with BM is impossible. We offered to take SD early on visitation instead of making BM leave school early and having SD go to a sitter for a couple of hours on SD's bday and BM refused just because it would mean extra time for DH. So SD spent her birthday with a sitter and BM didn't even go to school because she was already drunk when we came to get SD that night unless she was drinking in school).

Thanks for the help.

Ref
Title: RE: Actually...
Post by: Stirling on Oct 20, 2006, 01:34:23 PM
"DH's business started in January 2006 after he was laid off the October before.

He didn't get a distribution until April 2006 and the last one Dh received was in August. What Dh's lawyer is saying is that the judge will take the total distributions and divide them by 5 months instead of the 10 months to get the monthly amount.

Dh just received a small distribution in October, so maybe this will move the judge to 7 months."


What your attorney wants to do to seems to me to distort the CS calculation.  If the business was started in Jan. and the first distribution occured in Apr. I would think that the income distributed is related to the business activities that occurred from the start of the business to the date of distribution.  Accordingly, the monthly income should be calculated from the Jan. date the business began until the most recent distribution.

Has your attorney given you a reason why he wants to ignore the business activities that were conducted from Jan. to Apr. which resulted in the distribution?

Can your husband prove through company records etc. that the Jan. trough Apr. business activities generated the money that was used for the distribution?  One of the foundations of accounting is to match revenues with expenses.  To be consistent with this principal you would need to match the Jan. through Apr. business activity with the distribution that was made.  

This is a simple matching of the business activities to the funds distributed.  I would think that it is reasonable to average the total distributions from the date the business started to the most recent distribution.  

Also, how did the business receive its cash at the beginning of the year?  Did it recievecustomer payments from Jan. to Apr. but retained in the business until the business's cash flow allowed for a distribution in Apr?  This would support including the months of Jan. through Apr. in the averaging.  

Or,

Did the Business receive it's first customer payment in Apr which was used to make the distribution?  Please note, if such an Apr payment was made based upon business activities that occured in Jan. through Apr. you still have an argument to include the months of Jan. through Apr in the average.  However, if the Apr. customer payment related solely to business activities conducted in Apr. it makes the argument tougher to make.

One final thought.  I beleive you said the business is an LLC.  For federal tax purposes will this LLC be treated as a C corporation or a flow through entity similar to a partnership or S Corporation?  If it is to be treated as a flow through entity, and the LLC is expected to have a loss for the year, then your husband should be allowed to include his share of the expected loss in the CS calculations.  Just a thought.
Title: RE: Could someone help me understand soc's reponse to
Post by: mistoffolees on Oct 20, 2006, 01:34:30 PM
'Think out of the box' means to think about creative solutions - and trying something different. Your current approach isn't working, so try something else - and be open to considering all sorts of ideas.
Title: I just don't understand WHY the current approach wouldn't work
Post by: Ref on Oct 20, 2006, 02:25:36 PM
I am a public accountant and it makes perfect sense to me to annualize income from the inception on the business (and yes, sales receipts came in during January through April).

I think a person with no business experience would see that as a reasonable way to calculate. I must be wrong though, because Soc and the attorney seem to think that it will be annualized starting April.

I am so confused. I don't think that the way I am looking at calculations is extemely sophisticated, is it?

What kinds of ways does he mean by thinking out of the box?  

Thanks
Ref
Title: RE: I just don't understand WHY the current approach wouldn't work
Post by: Stirling on Oct 20, 2006, 03:11:16 PM
"and yes, sales receipts came in during January through April."

These are the records that you can use to try and support your case.  


"I think a person with no business experience would see that as a reasonable way to calculate. I must be wrong though, because Soc and the attorney seem to think that it will be annualized starting April."

Again I would ask your attorney to explain to you why the annualization should start in April.  Perhaps he doesn't understand the fact apttern correctly.  That the distribution income your husband received in April relates to work/services that he performed in January through April.  That April draw represents several months worth of income based on several months of actual work done.  Not to include Jan. through Apr. in the annualization assumes that your husband only worked and earned income in one month.  In a way the April distribution is kind of like deffered compensation.  

You may want to try and explain it to your attorney using an example that includes the attorney.  Such as:

Mr. attorney you are a partner in a PC and you take your compensation in the form of a draw/distribution as cash flow allows.  You work and collect payments for your work for several months.  Unfortunately, the cash flow needs of the business don't allow you to take a draw/distribution for several months.  You wife has decided to divorce you and wants to calculated CS starting with the first month you had a draw/distribution and not allow in the CS calculation the months where you didn't receive a draw/distribution.  
Title: Thoughts from out of the box
Post by: 4honor on Oct 31, 2006, 01:03:18 PM
One could hypothetically get the LLC to write him a check for $18.60 and dated in January after the first week of business. Use a check that is numbered later than the others (as if the check were written on the wrong book of checks.) So that it shows income in January.

Cash the check with some other checks that come in so that it looks as if the check was made out and available/paid in the month of January, but forgotten until recently.

Submit. Enjoy!
Title: Good thought
Post by: Ref on Oct 31, 2006, 01:34:06 PM
Court was actually yesterday. It went great. DH's attorney only requested a reduction for the time her was unemployed stating that he is back on his feet now and making the same as before. Dh was awarded the reduction of about $2500 to be spread over 30 months and very little review was done about his current income.

BM may want to go to court seperately for the increase, but she will have some serious legal debt to get through first.

I posted on the second families board the rest of it.

Thanks everyone!!!
Ref
Title: RE: I just don't understand WHY the current approach wouldn't work
Post by: mistoffolees on Oct 31, 2006, 04:30:04 PM
That's the difference between an accountant and a business manager.

As a business manager, I'd tend to downplay the first few months. In almost any kind of business, it takes months to generate business and there's absolutely no reason to think that the first few months are representative. Furthermore, expenses are much higher at the beginning.

The judge's goal is to try to predict what future income will look like. The judge has apparently decided that the first few months of the business are not representative and therefore shouldn't be counted. Your own post implies that this is correct.

It would be impossible for me to make a definiitive statement without ALL the details, but what they're suggesting just plain doesn't sound unreasonable to me.
Title: Luckily the judge was smart and fair
Post by: Ref on Nov 01, 2006, 08:15:14 AM
and was able to see through ex's attorney's concept of what the numbers were. He actually did have great business sense and understood the ups and downs of a first year business better than what everyone anticipated.

It was a great victory for us and I think we will be reveling in it for quite some time.

PS Don't underestimate a public accountant's ability to understand business. Eventhough we don't see the day-to-day, we are able to get a good idea of what happens in dozens of different types of companies a year.
Title: RE: I guess we are SOL then.
Post by: Jade on Nov 05, 2006, 03:55:39 PM
>DH actually file for a decrease after he lost his job. He had
>no idea that this opportuntity would come about.
>
>Court is in less than 2 weeks. CS runs for less than 3 years
>from now.
>
>Any suggestions from the peanut gallery?
>
>Ref


In my state, child support would not be lowered because you lost your job.  What would happen is that the judge would only order a certain amount of the child support to be paid (with the remainder becoming arrears) until he found a job.  He would have to be show that there are literally no jobs left in his field.  This is what my attorney (who is a court approved mediator as well) told me when I asked.

Hopefully, your dh will be able to find a job soon.
Title: RE: Could someone help me understand soc's reponse to
Post by: Jade on Nov 05, 2006, 03:59:47 PM
>I think Soc. is trying to tell you that you need to get
>creative in your approach and arguments in order to support
>your case.  
>
>If I understand your situation correctly you started a new
>business at the beginning of the year which initially
>generated significant income.  Currently, the business is not
>generating as much income.  Your concern is that a pending CS
>modification will result in an over-stated CS award based on
>the beginning of the year profits.
>
>
>I don't know the details of your business, but here are a few
>arguments that you could use if the fact pattern is there to
>support your case.  First is what Soc. suggested, that you
>gather support to show that your business is cyclical.  That
>given the nature of the business you make more money in the
>beginning of the year and less at the end of the year.
>
>You could also try to make a case that the beginning of the
>year profits were extraordinary and non-recurring in nature.
>That it was a one time event and the end of the year profits
>is a more realistic expectation of what your future income
>will be.
>
>As Soc said you will probably need some kind of expert to
>testify in order for your arguments to have credibility with
>the judge.  
>
>I agree with Soc when he said that judges/attorney don't like
>math.  This is why the will give credibility to an expert
>financial witness.  It is also why a judge may lean towards
>just annualizing your year to date income for the year and use
>that in the CS calculation since it is simple to do and is
>based on a lodgic the judge can understand.  Again you have
>the burdan of proof to show that annualizing your year to date
>income will distort the CS calculations.  You need to prove
>what a realistic expectation of your future recurring income
>will be.
>
>If your new business is so volitile that a reasonable
>projection of your future recurring income is not possible
>then you should consider, as Soc. suggested, to cut a deal
>with your Ex which deviates from the guidelines.  Soc.
>suggested to base CS as a specific percentage of your actual
>earnings.  Again get creative here in trying to come up with a
>compromise that everyone can live with.
>
>Good Luck!!!

Just because a business is cyclical doesn't mean that the all of the income won't be used.  What can be done to help ease the financial obligation during the low times is to determine what child support would be based on the income for the entire year and then structure the payments to be higher during the high times and lower during the low times.  This is going to require co-operation with the custodial parent.