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Financial Issues This forum is for discussing any of the financial issues involved in your divorce.

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Old 09-25-2012, 11:15 AM
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Default 4 over 5 year plan

I was wondering if anyone can provide me any constructive advice on the following:

1. The children's father is over $9,000 in child support arrears with FRO

2. One of the main reasons is because he is registered on a 4 over 5 year plan through his employment. This voluntary plan allows employees to divert 25% of their monthly pay cheque towards a self-funded sabbatical. According to which employees contribute 25% of their salary for 4 years and then receive a paid sabbatical in their 5th year.

3. In realistic terms, a sum of $2000 is deducted from his monthly income before FRO has an opportunity to garnish his wages at 50%

4. He registered on to this plan two years after the Child Support order was issued. Consequently, every month he is not able to meet the obligations of child support ordered and falls into arrears.

Is there any way I can address this?

The court is well aware of this 4 over 5 year plan and recently took it into consideration when deciding upon whether section 7 expenses were reasonable given the parents financial income. But the enforcement of the support order related to section 7 expenses along with child support itself is through FRO who can only garnish 50% after his employer has substracted the $2000.

Many thanks in advance

Last edited by Nadia; 09-25-2012 at 11:21 AM.
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Old 09-25-2012, 11:49 AM
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Wow, that is a really interesting situation and I hope someone can offer some advice on this. I'd be really interested in hearing what the options are as well.
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Old 09-25-2012, 12:17 PM
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According to which employees contribute 25% of their salary for 4 years and then receive a paid sabbatical in their 5th year.
Likely a minutiae, but should he not be deferring 20% of his income per year? That way he receives 80% income per year for 5 years, instead of 75% for four followed by 100% in the fifth.

Quote:
1. The children's father is over $9,000 in child support arrears with FRO
Will the arrears not be paid by garnishing his income during the 5th year, when he would not otherwise be earning an income?

Quote:
3. In realistic terms, a sum of $2000 is deducted from his monthly income before FRO has an opportunity to garnish his wages at 50%
Please tolerate a bit of number crunching.
If he has 25% of his income - 2,000 - reduced per month, then his yearly income should be $8,000 per month (or 96,000 per annum). If he has $6,000/month after the deduction, is there not $3,000 available for garnishment?

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Is there any way I can address this?
If he does not pay as Ordered, consider whether it is in your (and your children's) best interests to enforce against property. The main consideration should be whether there is equity in his home.
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Old 09-25-2012, 02:59 PM
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Thanks for the response Orleanslawyer.

The paystub he submitted to court indicates he pays 2000 per month towards this 4/5 year plan. His annual income is over 100,000 from this income source. So contribution to 4 over 5 year plan is around 20-25%

1. Child support order was issued in 2008.

2. He registered on to the plan some time in late 2010.

3. Arrears started to accumulate

Through a consent order we were receiving the full amount of child support (1405) in 2008-2009 plus spousal support (1500) in the total amount of $2900 every month back then. There were no arrears as he was paying around 1450 bi-weekly.

Beginnng in 2010 spousal support ended. But he was still supposed to be paying 1405 in child support and beginning in January 2011, FRO began enforcing an additional order of 1000 towards special section 7 expenses. But he started falling into arrears. Beginning in October 2011 the support order towards special section seven expenses was increased to 1300. For the past year and half we have received around 2178 per month. That is around 500 per month less what he should be paying.

There has been no change in employment. Same position. Reported increase in salary based on the fact that he was contributing 1600 towards the 4 over 5 year plan in 2010 and now is contributing 2000. Child support hasn't been adjusted.

FRO is garnishing him at 50%. So, following your number crunching...there should be NO arrears and he should have no issue with paying the current child support obligations and his proportion of section 7 expenses.

If he was paying 2900 without incurring arrears back in 2009. He should be able to pay 2705 in support obligations in 2012. There has been no other change other than this 4 over 5 year plan.

In respect to the paid sabbatical. He will receive a salary in his fifth year with monthly pay stubs as he has been receiving in the past 4 years. So there is no zero income so to speak in year five. He only pays taxes on 75% or 80% of his current salary. In year five he will pay tax on what he is paid out then. In respect to the fifth year, there will be still be ongoing child support payments based on his income (which will be what it has been for the past 4 years) and the outstanding arrears.

Last edited by Nadia; 09-25-2012 at 03:31 PM.
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Old 09-25-2012, 03:28 PM
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In respect to the paid sabbatical. He will receive a salary in his fifth year with monthly pay stubs as he has been receiving in the past 4 years. So there is no zero income so to speak in year five. He only pays taxes on 75% or 80% of his current salary. In year five he will pay tax on what he is paid out then. In respect to the fifth year, there will be still be ongoing child support payments based on his income (which will be approximately what it has been for the past 4 years) and the outstanding arrears.
You may wish to speak to a lawyer about this before pursuing anything in court.

Based on my understanding, he is earning 80% of his "max" income each year for five years, while working for four. As such, while he receives a salary in the fifth year, he won't actually be earning anything - these payments are deferred from income already earned.

Notwithstanding issues of imputing an income to him in the fifth year (is the sabbatical paid? Why does it require income deferral?), if his income is reduced so too would be his support obligations. Based on his earnings, it sounds like he should either be paying full guideline support for four years, then nothing in the fifth (unless income imputed), or else guideline support on the reduced income for all five years.

What is the purpose of this sabbatical? Is he looking to have a year vacation or are there work benefits involved?
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Old 09-25-2012, 03:46 PM
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Yes, the sabbatical is paid.

There is no "official" purpose to this sabbatical. Other then for him to get involved in some personal projects of cultural/religious nature (not work related) with some long periods of vacation thrown in.

The 4 over 5 year plan is a GOOD deal and I am sure will be very beneficial for him. Not many employers will offer employees a "paid" sabbatical.

Last edited by Nadia; 09-25-2012 at 04:15 PM.
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Old 09-25-2012, 04:10 PM
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Other then some nice vintage cars worth 75,000 (majority of which he claims to have sold, suspect he has transferred ownership to family); some $35,000 in shares (which strangely dissappeared from his last financal statement without explanation) and an RRSP, he does not have any significant assets.
RRSPs are easily liquidated, as are shares. If he is failing to meet his support obligations you may wish to pursue enforcement against him; however, if 50% of his income is already being garnished then a plea for hardship may gain traction on his part.
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Old 09-25-2012, 04:16 PM
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In respect to hardship my question is this:

Is it reasonable to draw a distinction between someone who has a reduced income because of factors out of their control (i.e. change in employment or loss of employment) and someone who "chooses" or "elects" to voluntarily have their income reduced, so that they can register on to a voluntary plan at work? Registration on the plan is not mandatory for employees.

He has never proposed to have the child support reduced. If what you say is true, and he should be paying less in the first place, would it not be reasonable to expect him to have the child support adjusted? I think the fact that he has chosen not to either means he is a very generous fella OR he knows he will get his behind kicked in court.

Last edited by Nadia; 09-25-2012 at 04:25 PM.
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Old 09-25-2012, 04:20 PM
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Is it reasonable to draw a distinction between someone who has a reduced income because of factors out of their control (i.e. change in employment or loss of employment) and someone who "chooses" or "elects" to voluntarily have their income reduced, so that they can register on to a voluntary plan at work? Registration on the plan is not mandatory for employees.
Depends upon the facts. You may wish to consider the impact on his career long term; the cost (or gain) financially; tax consequences; his motives for electing this path.
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Old 09-25-2012, 04:37 PM
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Only he would know his motivation.

But what I can say is what he has informed the court in his affidavit and oral argument: "I have had to borrow on a Line of Credit on a month to month basis because I have NO money to make ends meet. Last month I had to pay for tires on my car and that cost me a lot of money. I certainly have NO money for any contribution towards section seven expenses."

The court disagreed with him and decided he should contribute a proportion.

He did NOT say anything about only receiving 80% of his salary in his affidavit or during oral arguments. I would have thought that would be something worth mentioning.

Actually he did not mention the 4 over 5 year plan at all in his financial statement. In his financial statement, he claimed he was paying $2000 every month towards union dues. But when one examined his paystub (which he kindly submitted with financial statement) it clearly indicated he was employed in a non-union position AND there was a section under deductions, where it clearly stated "4/5 year plan" with a deduction of 2000.

I think it is reasonable to assume he has been less then forthcoming about this 4 over 5 year plan.

Last edited by Nadia; 09-25-2012 at 05:30 PM.
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