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VMM FAMILY INSTITUTE WEEKLY INSIGHTS: LOANS CAN LEAD TO "IMPUTED" INCOME

In a recent case in Westchester County, the ex-wife moved to hold her former husband in contempt for failing to comply with a court order awarding her over $193,000 in counsel fees. The husband’s main arguments centered around the issues that he was unable to pay the award and the ex-wife failed to exhaust other remedies before seeking to hold him in contempt.

The court noted as to the second argument that contrary to his position, New York State Domestic Relations Law Section 245 was amended, effective September 29, 2016, to remove the exhaustion requirement. The legislature directed the amendment “to take effect immediately and to apply to all actions whenever commenced as well as all judgments or orders previously entered.” Therefore, the ex-wife’s failure to show that she exhausted other enforcement remedies, such as income execution etc. before seeking to hold the ex-husband in contempt, does not bar her from obtaining that relief.

As to the first argument concerning the husband’s alleged inability to pay, he testified that he had no other assets, except $30,000 cashed out from a 401(k) account to pay outstanding arrears. The husband was also able to prove that he did not have a present ability to pay the balance of the fee award out of his yearly earned income and accumulated assets. The ex-wife pointed out that it was undisputed that the husband’s brother paid over one million dollars in counsel fees since the inception of the case. The court thereafter concluded that the substantial money the brother had and was paying toward the husband’s attorneys for counsel fees could be attributed to him and considered toward his ability to pay the wife’s counsel fees. The court found that the funds taken as loans must be “imputed” (when speaking of responsibility, “imputed” refers to the obligation to answer for an act done) to the husband for purposes of paying court ordered counsel fees to the wife’s attorneys. As a result, the court found that the husband failed to comply with the court’s prior order directing payment of the wife’s counsel fees, and found him in civil contempt. The court further directed he be imprisoned until he paid the outstanding arrears.

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