Can I protect company assets from child support levy?
My husband runs his own remodeling company. Recently a judge ruled his monthly child support be increased based on the gross potential earnings of the company and not our net earnings after expenses.
This made our child support more than 40% of our monthly expenses and we simply cannot sustain this drastic increase (we were current on our payments of $700 up until this time).
If we dissolve my husband's company and I start a new LLC under my name (I kept my maiden name and do not have any joint banking accounts with my husband), will this be enough to protect the company assets from potential levy and garnishment if I then pay him as a subcontractor instead?
I hope that makes sense. Thanks for taking time to help me clarify best practice options to support the kids and yet have a life both with them on visitation and without as we eagerly await our time together again while trying to build a profitable business!
In theory, if you start a new business that is not connected to your husband then that business will not be responsible for his child support payments. However, there are some complications with the plan.
1. If you dissolve the company and start a new company, you will have to do so without any assets from your husband or the old company. If you can start a new company on your own without your husband's involvement then there is no reason that you cannot do so and your separate company will be protected from his child support obligation.
2. Keep in mind that for this to work your husband will have to find a way to support himself outside of the business. Your husband will have to go get a job outside the company or you will have to pay him a salary commensurate with what the Court believes he is capable f making. If this doesn't happen, he may ultimately end up in jail for contempt.
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1. No, that doesn't make any sense, and 2, sounds like you are conspiring to commit fraud.
Let me see if I can put this together. You are married to H. H owes child support to former spouse, we will call her FS. H owns/runs a remodeling company. You are saying that H cannot (or will not) afford the new child support payments, so H wants a away to not pay child support yet protect his business from enforced collection. If H wasn't planning to default on child support, then there would be no need for the action you are contemplating. With me so far? The plan to try to have your cake and eat it to (not pay child support and protect assets) is to dissolve H's company and have you (current spouse or CS) open a company in your name in the hopes that by doing so, the court cannot reach the company's assets and receivables. Yes, there are two problems with that plan. (1) The dissolution and transfer of the business assets and operation to the new LLC would likely be construed a fraudulent transfer. (2). The dissolution and transfer will likely run afoul of the "alter ego" doctrine. A sham is sham, it is pretty obvious. The court would have the ability to hold the company liable as the alter ego of the husband even though on paper the company isn't his.
Asker
Hey Matthew, Thanks for your quick reply and we absolutely do not want to do anything fraudulent at all!!! We have been paying child support and a monthly amount towards arrears we accrued during a year of deep hardship. Despite paying the full amount on time every month, the ex-wife was allowed to freeze our entire bank account when she went after the balance of the arrears even after a judge told her to wait until the child support hearing. When this happened, we had no access to any money for bills, food or basic needs - and the kids were staying with us at the time. We just want to do what's right for everyone, ourselves included, by understanding how to LEGALLY prevent such garnishment attempts in the future so that we can rebuild our lives safely. The funds were proven to be company and not personal assets, but that didn't prevent us from taking a serious hit that ended up bankrupting his company. We are starting over again and we're not greedy or shady and have worked so hard to recover from some hard knocks. So I'm not here to ask what we can "get away with." I'm trying to understand if by starting the company over with me as the owner and him as a subcontractor will help us protect company assets if she tries to do this again so that we CAN pay our child support but actually have a chance at doing more with our lives than that alone. As I stated, child support was raised because of what the judge thought our company's earning potential was. He did not even consider the evidence we have that after paying overhead and personal expenses, we actually don't bring home a salary and are not making a profit. So now that child support has been more than doubled based on a non-existent gross profit, we aren't being faced with "having cake and eating it too." The garnishment was hard enough to recover from without losing our business and home and we were just hoping to find out honest and legal ways to protect our chances of eeking out a living for ourselves while still taking care of our responsibilities. There were no assets to transfer. The company is in the red because of the punitive actions taken against us. Since the law is not on our side, I was just looking to understand legal and honest ways to protect company assets from being outright seized like that again because we will lose everything and then no one wins
The court's order is the court's order. Apparently H lost in court. Since the decision is adverse to your interest, I understand you don't like it and disagree with it, but that doesn't matter. The only recourse is to appeal the court order. Otherwise, H is stuck with the new child support order and obligation. Instead of wasting time on schemes that will get you into more trouble than you realize (even though I understand you are not trying to be underhanded), you and your husband simply need to hustle and find more work so H can pay his obligations and the two of you can live.
