The Black Hole of Earnings

Divorce and the Self-Employed

One of the prickliest issues in a divorce is quantifying income for those that are self-employed. Due to its very nature, self-employment has gray areas, which can become black holes for those who are looking to reduce their reported income.

This situation arose recently where one spouse was self-employed in a business she had run for several years. Suddenly, just months before the divorce, she had a significant reduction in earnings. During an attempt at mediation where the wife argued her alimony and child support obligations should be based upon her current income, the husband became suspicious. He questioned why out of the blue the wife’s income had dropped so suddenly in recent months. When satisfactory answers were not readily forthcoming, and the husband was unable to obtain the requested information, the mediation efforts broke down.

The husband then consulted Attorney Jeremy Carter, who immediately filed the divorce papers and began the discovery process. In a mediation setting, the parties rely on one another to be truthful and forthcoming with important information. In a formal court process, the parties are entitled to receive all relevant and necessary information. If one spouse is unwilling to provide the requested documents voluntarily, he/she may be ordered by the Court to do so. This is one of the main differences and advantages of going through a court process, known as litigation, rather than mediation.

Once the required information was produced, the mystery was solved. In anticipation of the divorce, the wife began working less hours in her business. Due to a recent inheritance, she was able to maintain her previous lifestyle while still technically showing less wages. After being confronted with the facts, the truth about her income was revealed and she was required to pay her fair and rightful share of child support and alimony.