April 2013 Archives

April 25, 2013

In California, A Spouse's Business Debts May Be Divided Evenly in Divorce

1415802_bank_loan_concept__2.jpgDivorcing couples in San Diego, and throughout the state of California, have the complicated and emotional task of sorting through their community property to determine how to divide the assets. But spouses on the verge of divorce should also pay close attention to the debts that have accumulated throughout the marriage. Those too may be equally allocated. Each state has its own set of family laws and procedures to follow. In matters concerning property division, the importance of hiring an experienced, local divorce attorney who is well-versed in the particular laws of California, cannot be overstated.

The extent to which a spouse inherits the other's debt depends in large part on the laws of the state within which they were married. Because California is a "community property" state, debts incurred during the marriage will be evenly divided during the divorce proceedings. A recent Fox Business article focuses on what happens to a woman's credit after a divorce if her husband has a business credit card debt. The main message in the article was: the answer may vary from state to state. In most cases, it seems that the person who filled out and signed the credit card application agreement will be the one the company goes after in seeking to recover payment.

While the credit card company is known to go after the signatory when some type of wrong-doing has been detected, if the issuer of the credit card happens to win a judgment against that person, it can still seek the couple's joint assets to satisfy that amount.

There are many ways that people can protect themselves in such situations. Calling the credit card issuer directly to identify the signatory is one way to ensure that you will not be the one they go after in the event of a default in payment. Another way to protect your assets after a divorce is to make sure your funds are in your name only and clearly separate from your ex-spouse's. Of course, if the couple signed a pre-nuptial agreement, all bets are off and each party should consult with a local attorney to understand their respective rights under that contract.

Once a couple has decided to divorce, in order to understand what assets and debts you jointly have, a good idea is to make lists of everything you own and owe. Part of this task is to determine which items are considered community property versus separate property. Once you have that figured out, the logical next step is to calculate the fair market value of the assets.

Under California law, divorcing spouses are required to fill out and exchange with one another a "Schedule of Assets and Debts." Essentially, it is each party's financial declaration of disclosure. Spouses are encouraged to be open and honest in preparing the schedule of information. Even after the debt allocation is completed, there could still be issues that arise later on. For instance, when spouses agree to divide up the debts they owe, it is important to realize that the entities or people you owe the money to are not required to honor or recognize the arrangement between you and your spouse. There are many complicated issues that can arise from the division of community property, especially when it comes to marital debt.

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April 18, 2013

Former LA Dodgers' Owner Back in Court as Ex-Wife Petitions to Set Aside Divorce Settlement

216494_dodgers_baseball_game.jpgFor spouses seeking to divorce in San Diego, California law generally requires that marital property be divided equally. Identifying marital property and determining its value are critical parts of any divorce case. In some instances, a party to a divorce settlement could later argue that because of fraud or errors made in determining the value of marital property, the court should set aside the settlement. Because the value of marital property is of crucial importance to the outcome of the settlement, spouses are encouraged to hire an experienced San Diego family law attorney who will work to get the best settlement for their case.

According to a Bloomberg news article, Jamie and Frank McCourt dissolved their marriage in 2010. They announced their divorce settlement in October 2011, which allocated to Ms. McCourt a tax-free sum of $131 million. Six months after their settlement was finalized, Frank McCourt sold the Los Angeles Dodgers for $2 billion. After learning about the sale of the team, Ms. McCourt petitioned a California Superior Court judge to set aside the settlement, claiming that it was based on fraud. She contends that as co-owner of the team, she was entitled to a great deal more than the $131 million she received under the settlement.

According to some reports, it is said that Ms. McCourt received 7% of the couple's assets, while Mr. McCourt received 93%. The motion filed recently claims that after the sale of the team, less any relevant debts, Mr. McCourt's assets turned out to be worth $1.7 billion, more than 10 times the amount Ms. McCourt received in the settlement.

Although the process can become costly and time consuming, California law does provide an avenue of relief for parties who wish to set aside a divorce settlement. Under Code of Civil Procedure Section 473, or Family Law Code Section 2122, an ex-spouse may seek to set aside the settlement on grounds such as fraud or mistake, among others.

As part of her motion to set aside the divorce settlement, Ms. McCourt sought to uncover testimony from a confidential mediation proceeding between the Dodgers, Frank McCourt and various league officials. According to another article, the U.S. Bankruptcy judge who oversaw the team's bankruptcy case refused to allow Ms. McCourt access to the information revealed during the mediation sessions. In the judge's opinion, the confidential mediation was "an essential ingredient in the success" of resolving the Dodgers' bankruptcy case.

It should be clear that the best course of action is to be fully aware -- in advance of the settlement discussions -- of all of the marital property and the respective worth of each item. Ms. McCourt admitted to being surprised at herself for making such a "huge mistake" as to the value of the marital assets, namely, the baseball team. An experienced, local divorce attorney can assist you in the thorough identification and valuation of all marital property, and should conduct an exhaustive investigation of your and your spouse's marital finances.

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April 11, 2013

Kris Humphries Fails to Show Up at Court Settlement Conference with Kim Kardashian

869848_roads_sign.jpgGoing through a divorce has been described as one of the most difficult times in a person's life. In order to lessen the stress and expense, divorcing couples in San Diego may request that the court order a settlement conference with the intention of resolving any outstanding matters in dispute. By doing so, the parties may be able to avoid taking their case to trial. Under California Law, the court also has the authority to order one or more mandatory conferences on its own motion, if doing so would serve to move the case along more efficiently. Only an experienced San Diego Family Law attorney can help you to navigate a process steeped in local rules and procedures.

In what may not be such a big surprise, Kris Humphries and Kim Kardashian are encountering another little hurdle in their very public divorce proceeding. According to a recent news article, Mr. Humphries failed to show up at a recent mandatory settlement hearing with a Superior Court judge in Los Angeles. It has been reported that the judge was not happy about Humphries' absence at the conference and scheduled another hearing to determine whether he should be penalized for not appearing. One reporter said the judge believed Humphries was "mocking" the entire court system by failing to appear. In addition to that hearing, the court ordered a new date for the settlement discussions in the hopes that this time Humphries will attend. The trial is still scheduled for May 6.

The Superior Court in San Diego provides a great deal of information on its website for parties who are pursuing a settlement conference. At this hearing, a judge -- or perhaps a volunteer attorney -- helps the parties by reviewing the case and evaluating its strengths and weaknesses. The ultimate purpose is to encourage the parties to negotiate a settlement of the dispute. At this point, the judge (or volunteer attorney) would not have the authority to make any decisions or orders in the case. Often, a mandatory settlement conference is held close to the parties' trial date, giving them one last opportunity to resolve their differences before spending the time and money to endure a trial.

Before the parties attend the settlement conference, they are expected to exchange a "good faith" settlement demand and offer. The attorneys representing the parties must be fully familiar with the case and have complete authority to negotiate and settle the matter.

The Humphries/Kardashian case is interesting because he wants the marriage annulled while she is seeking a traditional divorce, despite the fact that they were married for only 72 days. Humphries has alleged that the marriage was based on fraud, claiming that Kardashian only married him because of her reality show, "Keeping up With The Kardashians".

While the Humphries/Kardashian divorce proceeding has been so extensively reported on, with paparazzi and reporters cramming the courthouse, many of the issues they are facing occur in a great deal of divorce cases. A divorce proceeding and settlement conference can be a relatively smooth process with the help of a dedicated and experienced attorney

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April 4, 2013

Under Community Property Principles, Impending Divorce Could Threaten Chief Executive's Control of Billion Dollar Oil Company

1388612_market_movements_2.jpgCalifornia is a "community property" state. This means that in the eyes of the law, a marriage makes two people one legal "community." In effect, when couples marry in San Diego, the wealth (and debts) they accumulate become community property, which entitles each spouse to one-half of the total amount. In the event of a divorce, community property and debts are typically divided equally. It is a widely accepted principle throughout the country; in some states it is referred to as "marital property."

A recent Reuters article describes the looming divorce between Harold Hamm, chief executive of Continental Resources, described as America's fastest growing oil company, and his estranged wife, Sue Ann Hamm, who has held "key posts" at the company over the years. The article focuses a great deal on the eventual division of marital property and how that will affect Harold Hamm's current controlling stake in Continental Resources, worth approximately $11.2 billion. It is unclear whether the couple had previously signed a pre-nup agreement and without one, the divorce settlement could split up Harold Hamm's 68% ownership of the company.

In this case, the company experienced a massive financial growth that took place during the course of the couple's marriage. According to the article, the stock share price increased virtually 500 percent during the five years following the initial public offering. The increase in the value of an asset during a marriage is typically deemed part of the marital property. And while this marriage falls under the laws of Oklahoma, many of the same legal principles apply as in California. In Oklahoma, just like in California, wealth that accrues during the marriage by the efforts of either spouse would usually be subject to equal distribution between the couple.

The court is expected to take a close look at what each spouse contributed to the increase in the business' financial worth. An interesting factor here is that Sue Ann Hamm was also working at the company during the marriage. In situations like these, when the issue of company control comes up in a divorce proceeding, it is reported that a spouse will likely get paid the value of the shares to which he or she is entitled.

Separate property, not subject to division between divorcing spouses, is anything that one owns before the marriage. For example, inheritances and gifts to one spouse even during the marriage are separate property. Further, rents, profits, or other money earned from one's separate property, and items one purchases with separate property are also deemed separate property.

For clarification, property is anything that can be bought or sold, such as a home, cars, clothing, or furniture. Property also includes other items that have measurable value, such as a business (as in the case here), bank accounts and cash, pension and 401(k) plans, stocks, security deposits on an apartment, life insurance with cash value, or a patent.

Determining what is marital or community property versus separate property can be complicated and typically has its roots in established local laws. Divorcing spouses are encouraged to contact an experienced Family Law attorney who practices in the San Diego area.

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