Author: Amy Edwards

The Life Span of a Typical Case in Pitt County

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Although the term “typical case” is a misnomer, there are certain goals to be met as you wind your way through the local court process. I say goals because the judge has the discretion to adjust the times as may be necessary in each unique case. Life is messy and court is messier, sometimes not fitting into a specific timeline. We’re fortunate to have an official Family Court in Pitt County, staffed with three individuals. They keep the process moving along, by means of local court rules, the development of certain standardized forms to use in routine administrative matters and expedited communication with the judges concerning the most efficient way to handle issues that crop up as the case moves forward. The court expects the case to be resolved within a year if possible.

Phase One: File the Lawsuit

A family law case is filed at the courthouse by a Complaint, followed by an Answer and Counterclaims in response, and other filings. This process of putting the court and the other party on notice of what relief each party seeks can take up to 6 months after the case is filed. In the meantime, the court might hold hearings on temporary (until the case is finished) child custody, child support or alimony within 2 months after the case is filed. The parties might also choose to use discovery, which might require a deposition, paperwork to be exchanged, or written answers to specific questions by the other party. Discovery by one or both parties can easily take 2-3 months. The party who files for equitable distribution, the division of marital assets, first must complete a very detailed listing of assets and debts called an EDIA, and the other party then files his or her version. This process takes at least 4 months.

Phase Two: Negotiation and Mediation

Although clients usually know what property and debt there is, and the income of each party, the attorneys don’t really know until he or she reviews the actual evidence (the tax returns, pay statements, self-employment, etc.). Once the attorneys have a general idea of the scope of the marital estate and what the actual disputes are, they can each then decide the best strategy to use. Another fundamental task is to figure out whether the parties already agree on certain matters, such as listing the residence for sale and dividing the proceeds.

When a custody case is filed, parents are automatically required to participate in child custody mediation. If they are successful, parents can expect the court to finalize any custody agreement within 2 to 5 months after the case is filed. Our local court rules also require the parties to use financial mediation for all other matters, such as alimony and equitable distribution, before they are given a trial date. The goal is to complete mediation within 7 months.

Phase Three: Launch Sequence Activated

If there is no agreement after mediation, the cost begins to skyrocket because court is the only option unless the parties choose to use arbitration. Then, there is a significant and expensive amount “busywork” before and trial preparation that must take place.

For example, in equitable distribution cases, within 7 months after the case is filed, the attorneys for the parties prepare a “cheat sheet” for the judge called a pre-trial order. Clients sign it. For lack of a better description, it means they agree to disagree. In other words, they are telling the judge in writing which things they want the judge to decide. It also includes stipulations, which are written agreements. They might agree that an asset is marital asset but not agree who keeps it. Other disputes can involve whether the asset or debt exists, whether it is marital or separate, what the value should be, and who keeps it or if it is a debt, who is responsible for payment of it. For both alimony and equitable distribution cases, trials should take place 9 months after the lawsuit is filed, and the order should be signed by the judge and entered within 12 months. The court expects child custody cases to be finalized by a judge’s ruling within 6 months.

Anatomy of a Subpoena

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What is a Subpoena?

Subpoenas are documents that require a witness to appear in court or at a deposition to testify.  A subpoena or subpoena duces tecum (rarely called by that name) may require a witness to provide documents or other evidence, in addition to requiring a witness to appear in court to testify.

What if You Don’t Respond?

A witness must be prepared to testify and/or produce the documents unless and until the judge rules otherwise. A court may hold the witness in contempt of court for failure to comply with a subpoena. A judge has the authority to incarcerate a person who refuses to testify or produce records as required by a subpoena.

The Rules

An attorney (or any interested party) may file a motion to quash (or cancel) a subpoena.  The decision about whether materials must be provided, or if a witness must testify, rests with the judge.  Sometimes judges will rule there are valid reasons to override the objections to a subpoena. This may be because the information subpoenaed is subject to a privilege, such as attorney-client privilege. Other types of special rules might apply to information requested, such as medical records.

Or, a judge can limit what must be released pursuant to the subpoena.  Sometimes judges will ask the person who has the information to “redact” it.  Redacting is taking a marker and blotting out certain information, such as the name of the person who reported suspected abuse of a child to Child Protective Services or social security numbers and dates of birth.  Judges may review the information “in camera” before making a ruling, which means he or she reviews the documentation in his or her office before allowing any of it to be released to the attorneys.

If You Are Served

A subpoena is usually served on someone by sheriff.  Not only can a sheriff hand the paperwork to you, he or she also has the legal authority to serve someone by telephone call. A North Carolina subpoena includes information for witnesses, explaining the duties and rights of a witness.  Call an attorney immediately if you are served, and time is of the essence. A court order is the only way to avoid obligations to testify or produce records.

Examples of reasons a court might enter an order if someone makes a proper motion:

The subpoena fails to allow reasonable time for compliance.

The subpoena requires disclosure of privileged or other protected matter and no exception or waiver applies to the privilege or protection.

The subpoena subjects a person to an undue burden or expense.

The subpoena is otherwise unreasonable or oppressive.

The subpoena is procedurally defective.

If you are served with a subpoena and want to know your rights or you need to file a motion to quash a subpoena, contact an attorney.  Time is of the essence, especially if you were served shortly before the trial date is scheduled.

How Do I Get My Name Off the Mortgage?

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To answer this question, you must understand the basic definitions and differences between property ownership and liability for mortgage debt. These terms are easy to confuse because, very often, the same people who are joint owners are also liable for mortgage debt.

Ownership: Deeds

A deed is the document that most typically transfers ownership of real property. Other times, a Last Will and Testament or even court order will convey an ownership interest. Ownership may be conveyed solely to one owner of the property; other times ownership is conveyed to multiple owners, as is often the case when two married people own a home together.  A deed means ownership of real property.

Liability: Mortgage Debt

Just because you are a joint owner of a residence doesn’t automatically mean you are also jointly responsible for the mortgage debt. There are occasions where only one owner is liable for the mortgage debt. When one of the property owners is self-employed, for example, the mortgage lender might approve the loan based only on the income of one spouse who has income that’s easily verified by a W-2 statement. If you sign the promissory note (i.e., the mortgage debt), you are responsible for repayment of the debt. If you didn’t sign the note, you generally have no responsibility to pay it unless there is a court order or separation agreement that requires you to pay it. Additionally, even if you did not sign a promissory note, you probably signed a document that allows the mortgage to be a lien on property in which you have an ownership interest.

How Do You Remove Your Name?

Let’s assume the property owners are married and they both signed a promissory note for the mortgage debt. If they sell the residence, the mortgage is satisfied (paid off) and neither spouse’s name remains on the mortgage. If one spouse keeps the residence, the other spouse will typically want his or her name “removed from the mortgage.” For our purposes, that means the spouse keeping the property will refinance the mortgage debt, acquiring a brand new mortgage debt in his or her individual name. When the new mortgage debt becomes effective, the old mortgage debt that was in both names will then be satisfied. If the mortgage debt is already in the sole name of the person who keeps the residence, there would be no need for the mortgage debt to be refinanced.

How is Marital Property Valued?

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In equitable distribution marital property cases, the court has a legal duty to identify assets and classify them as marital, separate, divisible or mixed assets (part marital and part separate). Parties are always free to stipulate or agree that assets have certain values, but if they cannot, the judge must make the decision on what each asset is worth.

What Does the Law Say About Value?

For marital property purposes, the value of a marital assets is fair market value, “the price which a willing buyer would pay to purchase the asset on the open market from a willing seller, with neither party being under any compulsion to complete the transaction.”[1] The court must use the net value of marital property, meaning the fair market value minus the outstanding debt at the time the parties separate. [2] If the court finds that a property is worth the same thing as the outstanding debt, the value is zero. Courts also assign negative values to assets worth less than the outstanding debt. New vehicles often fall into this category when the down payment is not substantial.

Valuing Marital Assets is Mandatory

Only if an asset, or part of an asset, is marital does the court then have to make a ruling on the value of it. It sounds like common sense but if neither of the parties presents evidence to the court of the value, the court cannot just make up a value. In one case[3], a couple owned a gas station, and the business was in the husband’s name. Although the wife proved that the business was established after marriage and before the separation, she failed to offer any credible evidence on the value of the business. The court must value an asset in order for it to become a marital asset. Therefore, the court had no choice but to award the business as his separate property.

Property Appraisers

The most obvious way to prove the value of an asset is by an appraiser who has special skill and experience with the asset at hand. People frequently have appraisals performed for jewelry, real estate and antiques. Often, the appraiser is hired by one or both of the parties to prepare a report for the court, to be used during the trial. Appraisers value marital property and the increases in value of separate property when the non-owner says there is an increase in value during the marriage. They also determine values of “divisible property,” which includes certain increases or decreases in the value of marital property from the date of separation until the date of the trial.

Certified Public Accountants

CPAs value any number of things, including the value of ownership interests in corporations, medical or legal practices, stock options and investment accounts, and other intangibles (i.e., the abstract concept instead of something you can hold in your hand). One routine asset that CPAs value is the marital portion of retirement accounts, meaning the value created between the date of the marriage and the date of the separation. All benefits generated before the marriage and after the separation belong to the employee spouse. If there are contributions to, or withdrawals from, a retirement account such as a 401(k) plan, the CPA also values those in comparison with the overall value.

Do-It-Yourself Values

There are a few assets that are straight forward enough for clients to testify about in court, with the help of a few trial exhibits. Vehicles sometimes fall into this category, mainly because there is a ready-made source of information concerning the value, such as the N.A.D.A Blue Book for vehicles. The value of whole life insurance is based on the cash-surrender-value of the policy, which is easy to obtain. Term life insurance has a zero-dollar value. The value of publicly traded shares (not a closely held corporation) on a given date can be shown by using the stock market index. However, when the shares are part of a larger portfolio or investment package, or if some of them are bought and sold before reaching the courtroom, a spouse must value the entire portfolio or investment package which isn’t as easy to value.

If you have unique personal property, like a moose head, you might find a ready-made market on E-bay or some other similar site. Depending on which side you’re on in a case, one disappointing (or exciting) thing is depreciation. The value of personal property, such as household furniture, at the date of separation is a depreciated value, meaning garage-sale value. This usually arises with brand new vehicles and household property. For example, a $1,500.00 computer purchased three years ago might be worth $200.00 on your date of separation.

Retirement as Marital Property

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Retirement benefits are often the most valuable asset a couple owns.  Pensions are essentially promises to pay the employee when the time arrives, based on a formula calculated on the years of employment and other factors. A defined contribution plan, like an IRA or 401(k), is an actual account containing various investments. It has an exact value at any given time. Retirement is intended to be used for income upon retirement, and there are severe tax penalties if you use or withdraw funds if you have not reached a certain age, on top of the funds being considered income.

Who Decides The Amount Each of Us Gets?

When a couple separates, they may choose to enter into a contract called a separation agreement, which usually resolves all of the marital property issues.  Yet another way to finalize the property is through mediation or some other type of alternative dispute resolution. You or your spouse may file a lawsuit for equitable distribution and ask the court to make the decisions about who keeps what.

The Nuts & Bolts

In North Carolina, as part of the claim for division of marital property (called equitable distribution), the retirement must be classified, meaning it will be considered marital, separate or mixed (part separate and part marital) property.  Next, a value must be agreed upon or ruled upon by the court.  CPAs or other financial professionals will give expert opinions when disputed, such as the exact value of a pension plan when the person has not yet retired. The court will also rule on the plan value for funds earned before the marriage, if any, and the value based on any funds contributed after the separation.  Matters become more complicated if there are required minimum distributions (RMDs) based on age after the separation, withdrawals after separation (thereby reducing the overall value), roll-overs or multiple companies managing the plan if the company has changed or been merged with other companies over the years.

How Are the Benefits Actually Divided?

When a pension must be divided, there is typically a court order directing the plan administrator to send two checks each month when the benefits are paid, one to you and one to your former spouse. This order is called a QDRO (qualified domestic relations order), or sometimes just a DRO, depending on whether the account is subject to a federal law called ERISA. For military accounts, a MPDO (military pension division order) is the type of court order that accomplishes a division of benefits. Done properly by your attorney, the division of benefits does not create a taxable event. Some retirement benefits, IRAs for example, are divided by a roll-over transferring a portion of the account to the other person’s account and the process is completed. Another consideration to take into account is how death benefits are assigned, and who any beneficiaries will be. If there are any outstanding loans against the account, the court or the parties must determine how that debt will be treated.

Are Credit Card Debts Marital?

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In short, credit card debts can be marital, just as any other type of debt. In contrast with marital property, the law doesn’t assume a debt is marital just because it was incurred during the marriage. If a debt is marital, each party is equally responsible for it, although the court usually assigns it to one party to equalize the net part of property each party gets. If a debt is separate, it isn’t calculated into the marital estate. To understand credit card debt, we must first look at what a marital debt is.

The Timing of Marital Debt

A marital debt must generally be incurred by one or both spouses while they are married and before the date of separation (we’ll call it DOS) unless the proceeds were used to pay off the “old” marital debt that existed when the parties separated. [1] Like marital property, marital debt must exist at DOS. If you just paid off your credit card with your bonus from work, and then you separate, the debt doesn’t exist and it is not a marital debt for which you would get credit.

What’s in a Name?

Marital debt can be in the names of one spouse or both. However, there is one important distinction between debt and marital debt. The court can say who is responsible only as between two spouses. But the court can’t tell a third party, such as Mastercard or Visa, that they can only enforce the debt against one person when two people signed the agreement to repay them. The court may indemnify a spouse, meaning that if the husband is assigned to pay the credit card debt and he fails to do so, he has to repay the wife if the credit card company sues her for payment. But if the other spouse had the money to repay you, he or she would’ve probably paid the debt in the first place.

Joint Benefit: The Key Issue

Unlike marital property, to call a debt marital, it must be incurred for the joint benefit of the parties. [2] There is no presumption that the debt is for the benefit of both parties. If you want to prove the credit card debt is marital, you have the burden of proof to show that the charges were for the joint benefit of the parties, up to the DOS. Courts have vast discretion in ruling on whether charges benefited both parties. Charges for groceries and gas probably are, but charges for one spouse’s dental treatment probably aren’t.  Most people make on-going charges, including charges made after DOS. Another difficulty can be non-descriptive statements. How do you show what you purchased from Wal-Mart for $175.43 from six months ago? A critical difficulty is proving what the outstanding credit card balance only on DOS was used to purchase. If the balance at DOS resulted from purchases made over three years, you still have to prove which ones were marital.

Financial Fault in North Carolina Property Division

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Traditional marital fault, such as abandonment or adultery, does not matter when the judge divides marital assets in North Carolina. Generally speaking, equitable distribution of marital property is strictly a math calculation, similar to a business transaction. There is a very strong policy for the courts to divide the marital estate equally unless there is some special reason why the marital assets are not equally divided. Although marital fault does not apply in property cases, the court may consider financial fault. When one spouse wants more than 50% of the marital property, he or she has the burden of proving a special reason or factor applies.

What Counts?

Sometimes, the same behavior that is considered marital fault is also coincidentally the same behavior that constitutes financial fault. Some of the special reasons (called factors) the judge can consider when deciding whether to divide marital property unequally based on financial fault include:

(1.)  Acts to maintain, preserve, develop, or expand marital property.

(2.)  Acts to waste, neglect, devalue or convert the marital property.

(3.)  Any other factor the court decides is just and proper.

Examples

A spouse can argue the first two reasons listed above would apply when the other fails to maintain and repair a residence or other property, changing title of property to someone else trying to conceal it, or mismanagement of assets. Another situation falling into the category is a spouse hiding debts and the unintended consequences that impact the other spouse. Spouses may find out too late that the other must file bankruptcy on joint debts, leaving him or her holding the bag for those debts, or that there are lawsuits that could result in judgments that may be liens on the family home in some cases. Another situation allowing a judge to consider giving one spouse more than 50% of the marital estate is when one can’t pay a marital debt and the other intentionally refuses to pay the marital debt, such as a mortgage, and perhaps choosing to let a home go into foreclosure rather than have it awarded to the other spouse.

The Catchall

The last reason above, labeled “any other factor,” can be anything the judge determines is important after hearing evidence from both sides. This is a catchall for a party to ask the court to divide the marital assets unequally. Although it is not specifically listed by the statute, gambling away substantial marital savings could be an example of financial fault. One North Carolina Court of Appeals case found financial fault when the wife removed truckloads of marital property from the marital home immediately before they split. Another case found it when the husband was in a bigamous marriage and had a secret family. When someone spends substantial money buying a significant gift for the person with whom he or she is having affair can be financial fault, as well as marital fault.

Separate Property in a Nutshell

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NC Gen. Stat. §50-20 defines marital property and separate property for purposes of equitable distribution, the division of marital assets in North Carolina. Marital property is generally property either of you acquire during the time you are married and live together, so long as the property exists when you separate. There are certain distinctions concerning assets and debts during the time period after spouses separate. A case can become quite complex because there are also assets that can be mixed, being partly marital and partly separate. If debts for an asset were paid with marital money, for example, the asset might be mixed in nature. This article focuses on assets that are purely separate property.

Legal Definitions

Separate property is property you acquired before you got married. This applies not only to personal property, such as a vehicle, but real property as well. If you can prove an asset was one you inherited, it will be your separate property. A gift to you alone, not to you as husband and wife, is separate property as long as the gift is not from your spouse. In a peculiar twist, the statute says if your husband or wife gives you a gift while you are married and living together, that gift is marital property and not your separate property, with one exception. If your spouse says the gift is your separate property when the gift is given, it will be.

Professional licenses and business licenses that cannot be transferred are separate property. For example, a law license or medical license is separate property. Do-It-Yourself definitions are sometimes called pre-nups or pre-nuptial agreements.  Valid signed pre-marital agreements can be used to substitute an agreed-upon definition of separate property that is different from the definition used in the statute. Such an agreement can define separate property by title, meaning the spouse who bought an asset in his or her sole name while married and living together owns it as separate property. Similarly, people can agree who keeps what in a separation agreement, which is also a contract.

Do-It-Yourself Definitions

Sometimes called a pre-nup or pre-nuptial agreement, a valid signed pre-marital agreement can be used to substitute an agreed-upon definition of separate property that is different from the definition used in the statute. Such an agreement can define separate property by title, meaning the spouse who bought an asset in his or her sole name while married and living together owns it as separate property. Similarly, people can agree who keeps what in a separation agreement, which is also a contract.

Going Through Your Case with a Fine Tooth Comb: Appeals in North Carolina

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Judges sometimes make a ruling the day of court, perhaps after a child custody case. Other times, they take the case “under advisement” which means the judge is not prepared to make a ruling in court. Instead, the judge will consider testimony given by the witnesses, and sift through stacks of evidence and notes. Then, the judge usually makes a ruling by sending an e-mail to the attorneys or by putting a letter in their courthouse boxes.

You Don’t Like What Happened – Now What?

To appeal the ruling in your case, there must generally be some error in the way the judge applied the law in the case. If the judge ruled on the disputed facts in a case, the ruling is about the facts of the case, not the law. The judge decides the facts when there is a ruling that a person did something, or did not do something when there is a “he said, she said” situation. There are strict time limits for you to appeal, limits that begin on the day the order is officially filed. Temporary rulings are not typically eligible for appeal because they are later replaced by permanent orders entered when the entire case is done. At that time, the judge may choose to adjust the ruling to account for anything he or she feels should be addressed since the time the case was first filed.

Where Does Your Case Go and Who Handles It?

At the trial level, North Carolina family law cases are tried in District Court, the same court that handles traffic matters or misdemeanor criminal matters. Appeals from the trial court are heard by the North Carolina Court of Appeals in Raleigh. In rare cases, family law cases are then appealed to the North Carolina Supreme Court. Some family law attorneys handle appeals but many do not. There is a completely different set of rules and procedures for appellate cases. Such a case can easily take a year or two for the appeal to be completed. The appellate court will affirm (uphold), reverse (overturn) or remand (send back to be tried all over again) the trial court’s original ruling.

What Does All This Mean?

Any appeal takes a long time to wind through the system, just as a trial case does. And just like the lower court trial, an appeal is expensive and the stakes are high. In Eastern North Carolina, the cost of appeals makes them out of reach for many people. The trial level ruling is extremely important. Appeals are not the only option. If both parties agree, they can participate in alternative dispute resolution such as arbitration. If they participate in arbitration, they essentially hire a qualified decision-maker to make the decision for them.

How Long Will My Case Take?

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The time it takes depends on several factors, including which attorney your ex hires, how ready you are (or the other person is) to get the case resolved, and of course, how many things are disputed. People’s emotions can come into play as well, especially if one person wanted to separate, but not the other person.

Negotiation process

If you choose to negotiate through your attorneys, the attorneys will need paperwork from clients to determine the incomes and, sometimes, living expenses if you are negotiating child support or spousal support. Your attorney will also need documents from you to identify and value the assets and review the outstanding debts. The negotiation process can take as little or as much time as it takes to reach a mutual agreement. It does take some time for all parties and attorneys to get all of the appropriate documentation and correspond with each other or meet to attempt settlement.  No lawsuit is required to participate in child custody mediation, financial mediation, arbitration or collaborative family law.

Trial process

While each case is different, the usual case that becomes a lawsuit involving property, custody and child support, and perhaps alimony, takes about a year if it is tried in court. At least, that is the goal of family court.  There are several phases of litigation.

A document called a complaint generates the lawsuit.  Once it is filed and served on the other party, he or she will generally have 60 days to file an answer and any counterclaims if he or she files a request for additional time.  The party who filed the complaint will then generally have up to 60 days to file a reply to the counterclaims, assuming an extension of time was filed.

Court hearings for temporary matters, such as temporary child support, are usually scheduled for a date that falls 2 or 3 months after the date the complaint is filed. Next is mediation, which the court requires before any hearings on permanent relief are scheduled to be tried by a judge in the courtroom.  If the case is not resolved by mediation, there are many strategic things that can take time, such as depositions, appraisals and discovery. The trial itself will often take several days, and after that, the entry of the order may take a month or two.