Season 3 Episode 4: Separation and Divorce During COVID

Note: Our Podcast, “A Year and a Day: Divorce Without Destruction”, was created to be heard, but we provide text transcripts to make this information accessible to everyone. All transcripts on our website are created using a combination of speech recognition software and human transcribers and could contain errors.

Jaime Davis: Welcome to Episode Four of Season Three of “A Year and a Day.” I’m your host, Jaime Davis. You may have noticed that it has been quite some time since we have been able to record an episode. And here we are almost six months later, still in the midst of a pandemic and still unable to record in person. So today I will be speaking via Skype with fellow family law, attorney Lynn McNally. Lynn is a board certified family law specialist and partner with the Smith Debnam Law Firm here in Raleigh. You may recall that Lynn has joined us on previous episodes of the podcast, and we are glad to have her back with us today. Lynn and I will be discussing how COVID might impact your divorce and whether now is a good time to separate or not. So here’s our call.

Jaime Davis: Hi Lynn.

Lynn McNally: Hey Jaime. Thanks for having me today.

Jaime Davis: Yeah, thanks for joining us. I know that many folks at this point who have made the difficult decision to separate are worried about how the COVID pandemic will affect not only their ability to physically separate from one another, but also their ability to negotiate and finalize agreements about child custody, the division of their property, and also support. And then what will happen if they can’t reach an agreement and they find themselves in court. So Lynn, in your opinion, is it a good idea to separate during COVID?

Lynn McNally: Well, I think it depends on your circumstances. Um, each family’s, um, specific situation is incredibly different. Um, and you’re going to want to get some good legal advice, depending on no matter what situation you’re in to find out whether it’s the right time for you to separate or not.

There are a lot of considerations that you have to take into account. Um, one of the considerations is the value of, um, property, and property can mean real estate, but it can also mean things like businesses, um, or investments. And some folks might say, well, if COVID has affected the value of those assets, business values, asset values, real estate values in a way that they are somewhat diminished, it might be a good time to separate so that you can divide those assets at the diminished amount. Um, of course, some people may have that opposite feeling depending on who you are in the relationship.

Um, the other thing that is sort of interesting right now is just the logistics of physically separating, um, from your spouse. I know you’ve talked about this a million times and it’s, it’s the title of your podcast, but you have to actually be separated from each other in different residences for at least a year before either party can proceed with the divorce. Um, during those periods of time that that states were on lockdown and you couldn’t really leave your home, that was problematic. Of course that’s loosened up these days, but you know, I still think that there are some logistical difficulties with figuring out where you go.

Jaime Davis: Yeah, I agree. I mean, especially since most kids, at least in our area are not physically back in school and they’re having to do some form of virtual learning. And I know for a lot of families that virtual learning is actually taking place in the home. And, you know, a lot of folks were also still working from home. And so I just think the practical logistics of trying to list a home for sale and show it while you’re working from home, while your kids are trying to learn from home. Um, I think that could be really tough.

Lynn McNally: Yeah. And I think I have some sense that, that people out in the world today who might be potential buyers are not fully comfortable yet walking through homes that are occupied because of the pandemic. Um, I’ve seen realtors resort to virtual tours, which is a great alternative, but has never really, um, never really replaces being there in person. I don’t know how that impacts of potential buyers feeling about a home. Um, it’s, it’s just a really interesting and, and sticky situation because of the state of the world today. I mean, certainly there are, uh, times and circumstances under which it does make sense to separate and being able to sit down with your legal counsel and brainstorm the appropriate ways to do that considering all these unknowns is the first step, and maybe it’s not right. Uh, but when you talk to legal counsel and you figure that out, you can at least put a plan in place. And if it’s right, then you can start to execute on that plan.

Jaime Davis: Right. Um, to go back to a point that you made earlier about valuing assets, you know, big picture for equitable distribution, which is the division of property between separated spouses, that property is going to be valued as of the date of separation. And then, so like you said, if the value of the business is down right now, the family business, you know, if you’re that business owner, it might be a really good time for you to separate.

Um, likewise, depending on where you live and the price point of your home, you know, if you can figure out the logistics of moving, you know, now might be a great time to sell your house because the value might be up. So, you know, I agree sitting down with a lawyer who can help you think through these different issues is certainly a great first step.

Lynn McNally: You know, interest rates are also pretty good right now, which is another reason that people might want to consider, um, purchasing something. Uh, of course, if you’re just separated from a spouse and you’re seeking to purchase some sort of real property, at least in North Carolina, you could have some barriers to overcome while you’re still married.
There’s some ways to solve those problems, but they’re, they’re problems that you want to anticipate the resolution to before you take any action.

Jaime Davis: Yeah, it’s always best to have a plan in place, you know, even pre-COVID and pre-pandemic. Have that plan in place before you separate or move from the home. I think that’s key.

Um, we’ve, we’ve talked about assets. We’ve talked about logistics of physically separating. Let’s talk for a second about income and how a job loss by one spouse or the other might affect, let’s say a child support or a spousal support obligation.

Lynn McNally: Yeah. Um, certainly, uh, both child support and spousal support are based on the incomes of the parties.
And they’re based on the incomes of the parties at the time, the, the calculation is made, um, in most cases. It really depends on whether you have anything in place dealing with those obligations and whether the loss of a spouse’s income makes it difficult or impossible for them to continue to fulfill those obligations, um, or, or whether you’re just starting from scratch and trying to figure out what the obligations are.

Um, if my spouse and I are separated and he makes a hundred thousand dollars a year and I make $50,000 a year, but he lost his job because of COVID, so of no fault of his own, you’re not necessarily calculating support based on him making a hundred thousand a year and my making 50,000 a year. So it was just an uncomfortable place to be.

Jaime Davis: Right. I think a lot of it too is going to depend on, you know, are we talking about a job loss due to COVID? Are we talking about a pay reduction? Um, let’s say your spouse doesn’t completely lose their job, but let’s say their pay gets cut so that whatever business they work for can, can stay in business and keep going. You know, how long has that pay, cut, going to be in effect for right? Is this something that’s just a stop gap measure to keep the business afloat or is this a more permanent reduction in income? Um, it’s crazy to think how the loss of a job due to no fault of your own can completely change your role in the marriage as to whether you are the supporting spouse and the person who might need to pay alimony to your spouse, or you might be now the dependent spouse and entitled to receive some sort of spousal support from your spouse.

Lynn McNally: Yeah I think it can definitely change the dynamics. That’s for sure.

Jaime Davis: Yeah, absolutely. And I think it can really complicate things. Um, you know, we say all the time, it costs more money to run two houses than it does one. And especially if you’re trying to do that on a reduced family income, because somebody has lost a job.

Lynn McNally: Right. So it, it, when you’re in a family unit, if one spouse loses their income of no fault of their own, you as a family unit have to deal with that. So my point is, it may not be functionally any different, whether you’re separated or whether you’re living, um, as a family unit, you’ve got to make some decisions about how to manage the, the crisis that a person has lost or has significant reduction in income.

It’s hard for people to think like that when they’re separating or contemplating divorce, but those, it is smart, it is a smart way to approach it. It is a smart way to consider what might be the right decision for the family unit during that time, even if you’re not living as a family unit. Maybe you decrease your expenses. That’s one way to go about doing it. Maybe you look to other assets to help assist you for cashflow on a short term, like. Perhaps go into retirement accounts or things that, um, you may have an opportunity to do, um, in the current, uh, COVID crisis.

Um, another thing that to kind of think about is you don’t have to make permanent decisions. You know, if you’re negotiating with a spouse about, um, a resolution out of court of child support or spousal support issues, um, you can agree to, to deal with those things on a temporary basis, um, and, and get some time away from this event and see if, uh, more certainty sort of, um, hits us in the future. Uh, even our courts provide some ways for temporary solutions, particularly with regard to child support and spousal support. And I think these days, our courts are really open to the concept of being cautious, giving grace to people and making decisions on a temporary basis that can be revisited when things are more certain.

Jaime Davis: Yeah, I think that’s a really good point. Um, and along those lines, you know, while you’re trying to figure out potentially a temporary solution to these child support and alimony issues, it’s really important to make sure that both parties are exploring all of the benefits that might be out there and available to them.

You know, if you lose that job, have you applied for unemployment? Are you entitled to some sort of relief under the CARES act for anything? You know, can you take a distribution from your 401k or retirement account, you know, without some sort of penalty? Um, it’s really important to try to get creative with some, I guess, for lack of a better phrase, stopgap measures to kind of hold you over until there is some more certainty on the job front. Um, but there are ways that you can still move forward with the separation if you decide that’s what you want to do, even if somebody has lost their job.

So Lynn, what if you already have an agreement or a court order in place that addresses child support or alimony and you lose your job? Like, do you have any recourse at that point?

Lynn McNally: Yeah, I think that there are a couple of different things to consider whether you are the person who lost the job or the person who depends on support from you. There are some ways to kind of move forward to resolution. Um, if you owe a spousal support or child support obligation to someone and you lose your job due to COVID, you might file, assuming you have a court ordered obligation, you might file a motion to modify those court ordered obligations based upon a substantial change in circumstances. And that substantial change would be the involuntary and significant loss of income.

Courts are just starting, by my understanding, to work their way through those kinds of motions that have been filed and it remains to be seen how things are going to turn out. You know, courts were closed down for eight weeks, six weeks, eight weeks or more, um, over the summer. And so those folks who took advantage of filing motions to modify, because they had a loss of job or a significant reduction in income due to COVID probably have not had those motions heard and determined yet.

Jaime Davis: Right.

Lynn McNally: And so it remains to be seen. But my sense is that at least the judges that manage these cases in, in Wake County, North Carolina, are probably going to give a little bit of grace. Um, they recognize that nobody planned for this. It couldn’t have really been planned for. I suspect that they may make some temporary rulings or have some reviews associated with their rulings on support modifications so that the ship can be righted at whatever point in the future things can get back to normal.

There was a specific, I don’t know if directive is the right word, but strong suggestion, um, when the pandemic started and particularly during stay at home orders, that our judges were very clear. Don’t use COVID to, uh, jerk your spouse or ex-spouse around about custody. Um, they wanted to make sure that people were communicating well with each other and play in fair during this period of time that was just completely, um, unanticipated, and I suspect that they would take the same approach to motions to modify, um, that are filed.

Jaime Davis: Yeah. I agree with that. I think one thing that especially if you’re a business owner spouse that you might need to be wary of and keep in mind before you file a motion to modify and ask the court to reduce your support obligation, you know, did you apply for and receive PPP funds? And for folks that don’t know what that is, that’s the Payroll Protection Program, and business owners could apply for these funds and potentially receive what appears to be alone at first of, you know, hundreds of thousands of dollars, millions of dollars. It all depends on how big your business is and what you were entitled to ask for.

Um, but in a lot of cases, there is loan forgiveness, and the person is not going to have to pay that money back. So if you are the business owner and you applied for and received this money, you know, it really might be a wash, right? It might be a net zero for you. Maybe it’s not an actual income reduction because you received this money and it kept your business afloat and got you back on your feet. So, you know, I think courts are going to certainly consider that money in determining whether a modification is warranted or not.

Um, what do you do if you’re the spouse who depends on this child support or this alimony payment to pay your expenses and the other side just stops paying. What is your recourse there?

Lynn McNally: Well, the recourse in that event is to seek relief through the contempt powers of the court. Um, you know, when you have a court order and somebody is not following that court order, the way to enforce it against that person is, uh, to ask the court, to hold them in contempt, to find that they are willfully noncompliant with the order for no good reason. They, they know their obligation, they just are refusing to pay it.

And so the contempt process is available for those spouses or ex-spouses who rely on support of either child support or alimony or both from the other spouse. Again, I personally have not yet seen the outcome of one of those contempt motions considering, um, the circumstances surrounding COVID. I again think that the court might give some grace, um, but if you’re the person that needs that support, maybe you’ve also lost your job. Maybe you have also had reduced income. So I think it’s going to be a really delicate balancing act of our judges and courts just trying to figure out what’s fair, considering all the circumstances. And I suspect that what’s fair ain’t gonna feel good to either of the parties in that case. Um, well, we’ll see, we’ll see what happens. But, you know, with the court system being having been closed and backed up a little bit, you know, I, I’m not entirely sure how our judges are going to deal with those issues.

Jaime Davis: Yeah. I think it might boil down to, you know, bad faith. Like, did the person stop paying their support obligation because they truly had no way to pay it, right? Like they got, they lost their job. It wasn’t their fault. They didn’t have other resources that they could use. You know, in that case, maybe you’re not in contempt. But what if you’re a multimillionaire and you’ve got a brokerage account and you’ve got a, this, that, and the other that you could use.
You just don’t want to use it. Um, and you don’t want to reduce your own lifestyle to be able to continue paying that support obligation. You know, I think that’s going to be a completely different outcome for that person.

Lynn McNally: Yeah, I absolutely agree. Um, that is the definition of, of bad faith, particularly if that person has simply just discontinued paying support without filing a motion to ask permission to do that.

Jaime Davis: Right. Well we keep talking about filing motions and having court hearings and, you know, court was closed for lack of a better phrase earlier this summer. Are our courts operational right now?

Lynn McNally: Well, yeah, they’re operational. Um, it just looks incredibly different and there are some really great benefits to the way that we’re doing things now and there’s some difficulties. Um, one of the great benefits, um, to, I think lawyers, but also clients is that currently we’re engaging with the court, um, to, for what’s called calendar calls. So that basically roll call of the cases that are set on any given day to determine who is ready to proceed and how long they will need.

Um, that’s being done by a platform called WebEx, which is similar to zoom, just a web based, uh, platform kind of like Skype, right? Um, and so people, lawyers are able to appear virtually to respond to calendar call, um, to argue uh, short motions that don’t require, um, witnesses, and in some cases to argue, um, cases that have, you have to put on evidence in the form of witness testimony or exhibits under, under very limited circumstances.

Um, but beyond being able to engage virtually with the courts, our judges are still in the courtroom. And there are certainly some cases that simply can’t be accomplished by a web based platform. And assuming the court can reach you, meaning there’s time on their calendar to get to you on the day that you’re scheduled to be heard, um, they can have you come down and, and try that case in person. Um, there’s mask wearing that’s required. Social distancing is required. They are careful as to how many people are in the courtroom at any given time. I think they’re doing the very best that they can to keep people safe, but still keep the, the judicial wheels turning. Um, it just, it looks very different.

Jaime Davis: And just so our listeners know you’re mainly referring to what’s going on in Wake County, North Carolina, right?

Lynn McNally: That’s right. That’s, that’s where I practice primarily. And that’s really the only place that I have been engaged, um, since the pandemic started.

Jaime Davis: Yeah. It’s really important too, for, um, folks to understand that your court experience can look very different right now from county to county, just depending on where you are and what the various, um, judicial systems are doing in that county.

Lynn McNally: That’s right. It’s, I believe that it’s left up to coordinators in each county to figure out how to, um, of course follow any directives of the governor, but to deal with litigants and, and, uh, attorneys and any other courthouse visitors in a way that is safe and makes sense for their county.

Jaime Davis: Well, courts are operational, but maybe potentially still a little backlogged. Might be harder to get on that court calendar. Um, If you’re not interested in going that route, how do you think cases can be resolved outside of court?

Lynn McNally: Well, a couple of different ways. Um, both ways are highly endorsed for a number of reasons, but the first way is through the mediation process. Um, and there are several ways to mediate cases, but the one that I’m going to address right now is the process of the parties jointly hiring a neutral person to act as the mediator of whatever issues they want to try and resolve.

That mediator is not a decision maker. He or she acts as a, as a liaison between the two parties, carrying offers and counter offers back and forth and, and helping the lawyers and their clients see the great benefits that settlement can bring in an effort to get that resolution and get the deal done.

Um, mediations can take place in person now and some are, but there are also some mediators who have begun to do mediations virtually through the zoom platform. And those are actually really good ways to do it. Um, I’ve done the virtual mediations several times and, and I actually really enjoy it. It’s always nice to be able to sit in a room with your client, but this is a safe way to do it that does not have a lot of logistical hiccups. So that’s the mediation process.

Um, but assuming that you can’t, either through the mediation process or just by you and your spouse or your respective lawyers sharing offers back and forth and negotiating directly with each other, if you can’t get resolution that way and you have to have somebody make a decision for you, you can engage in the process of arbitration.

Arbitration is different than mediation in that the neutral party that the parties jointly hire acts as a judge. Can actually make decisions, hears evidence. You’re basically presenting a trial that you would present to a judge and the public courthouse in private to a judge that each of you have engaged to make this decision for your family.

Um, there are lots of benefits to arbitration. You know, some people might immediately think, oh gosh, we got to pay this, um, neutral person, this arbitrator and that’s going to cost more money. And while it’s true that, uh, arbitrators are paid individuals and typically the parties share the cost of that arbitrator equally, when you consider that you can schedule your case at a date certain and a time certain and go there and know that you can be heard, it actually saves a ton of money,

Jaime Davis: Right.

Lynn McNally: You’re not running down to the courthouse. You’re not preparing for something that you ultimately can’t, the court can’t get to. And then it’s set for six months down the road. There is much more logistical certainty with arbitrations that save time and money. And I think are a great alternative right now because our court system is a bit backed up by all of this stuff.

Jaime Davis: Yeah, I think that that is something that clients, um, sometimes don’t understand at first. I call it the put down, pick up factor, um, of a case where, you know, you get ready for it, you go down to court, calendar is full, your case gets bumped. There’s nothing you can do about it. I mean, there’s only so many hours in a day and you got to find a new court date and that new court date is months later, like you said, and, you know, while I wish I could remember every single detail of every case that I’ve ever prepared for, that’s just not realistic. And I’m going to have to prepare for that case again. And I’m going to have to review my notes and my outlines and my exhibits, and make sure that I’m ready to go the second time around. And, you know, that’s an added cost to the client. And so I totally agree with you, um, while you may have to pay the arbitrator, which you do, um, it could still end up being more cost-effective for you, especially if you have a more complicated case that is going to require a lot of the court’s time. Um, arbitration may be the way to go.

Lynn McNally: Right.

Jaime Davis: Well, Lynn, thank you for joining me today. If any of our listeners would like to contact you, what is the best way for them to reach you?

Lynn McNally: Well, folks can certainly find me on the web at my law firm. And that web address is smithdebnamlaw.com. And my email address is lmcnally@smithdebnamlaw.com. I’m glad to be here. This was an interesting way to record this, but I appreciated it.

Jaime Davis: Yeah, I think it turned out great. Thanks again for joining me.

Lynn McNally: Thanks Jaime.

Jaime Davis: I hope you all found this episode of “A Year and a Day” to be helpful. If you have any questions or comments, I would love to hear from you. You can email me at jdavis@divorceistough.com. If you like what you heard today, please leave us a review on Apple podcasts. As a reminder, while in my role as a lawyer, my job is to give folks legal advice. The purpose of this podcast is not to do that. This podcast is for general, informational purposes only, should not be used as legal advice, and is specific to the law in North Carolina. If you have questions before you take any action, you should consult with a lawyer who’s licensed in your state.