Reductions in Income and Their Effect on Support Obligations

Calculation of child support can be a very tricky subject in the Commonwealth.  This is because a Court can impute an earning capacity to an individual that is higher that their actual earnings, if the Court deems the actual earnings are below the individual’s actual earning capacity.  This concept gives the Court wide discretion regarding a determination if an earning capacity or a drop in earning capacity is the fault of the party, rather than the result of circumstances outside of the control of the paying party.

For instance, providing a silly but illustrative example, an orthopedic surgeon can’t simply quit his job and work at a coffee shop simply to lower income enough to merit changes in the support obligation.  In Miller v. Miller, 2017 Pa. Super. Unpub. LEXIS 4799 (Decided December 2017), the Court confronted the determination of whether the Court should impute income and maintain the prior support obligation or reduce the income level and thus reduce child support payments.

In Miller, the Father operated a masonry business.  The Court initially calculated the father’s income based upon his actual earnings at the time the support obligation was decided.  The father experienced a drop off in income and filed to have the child support modified downward based upon the reduction in his income.  The initial trial Court indicated that the original income which Father was earning when the support was originally calculating was what was going to continue to be imputed to the father and refused to modify child support:

“Father also requested a downward modification of his support payment because he was forced to close his masonry enterprise. He explained that he had to shutter his business due to his inability to pay vendors, satisfy mounting operating costs, and pay overdue taxes and unemployment compensation insurance. He obtained employment with a competitor earning $25.00 per hour. The conference officer discredited Father’s assertions, concluded that he voluntarily abandoned his masonry company to reduce his support obligations, and assigned Father an earning capacity that was identical to the income that he earned from his business. Accordingly, the conference officer issued an interim order that credited Father’s past mortgage payments against his support arrears, but did not alter the monthly support obligation.”  Miller v. Miller, 2017 Pa. Super. Unpub. LEXIS 4799, *2-3

The father appealed this determination.   The standard of review favors the trial Court heavily.  Basically, there must be a significant abuse of discretion by the fact finder or a Decision that violates the law or statutes.

The appellate Court concluded that the trial Court’s refusal to change their perception of the Fathers income was unsupportable.  The Court’s utilization of Father’s prior, exorbitant earning capacity instead of his modest actual earnings to calculate his income for support purposes was wrong and unsupported by the facts. Father argued that he no longer ran the masonry business and that the Court should not use earnings from that business to calculate his income. The fact finder rejected this as a reason for reducing the income capacity, somehow blaming the father for the reduction in income rather than external economic circumstances.  The father argued that he no longer could earn the same income that he did previously as the times had changed and that the amount of masonry work had dissipated such that his business was no longer viable given the economic circumstances.  The bottom line here is that the appeal Court believed that the reduction in income was not the fault of the father and suggested that the support obligation should be reduced and or a new trial should be held to review this credibility determination by the fact finder.

The law is clear that support obligations are determined by actual income and financial resources rather than earning capacity. Pa.R.C.P. 1910.16-2. (“Generally, the amount of support to be awarded is based upon the parties monthly net income.”). Indeed, earning capacity is reserved for instances where a party “willfully fails to obtain appropriate employment[.]” Smedley v. Lowman, 2 A.3d 1226, 1228-29 (Pa.Super. 2010).

The bottom line here is that if you have lost income due to economic or external circumstances – it is likely that the Court will reduce your support obligation.  Clearly if your income drop is something the Court feels you calculated, you may not be able to reduce your support obligation.

 

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