COVID-19: ARE YOU BOUND BY A FAMILY LAW PROPERTY SETTLEMENT BUT CAN’T COMPLY?

As of July 2020, unemployment in Australia has risen to 7.4%, according to the Australian Bureau of Statistics. Although some Australians may have been fortunate to retain their employment, they may be dealing with other serious financial concerns, such as reduced salaries, reduced asset values and other economic uncertainties. With COVID-19 being one of the main causes, many are now faced with the difficult situation of not being able to meet their financial obligations linked to their family law property settlement, spousal maintenance and child support payments.

Below are some of the main issues you may be experiencing which are relevant to your family law matter as a result of COVID-19:

1. Your property values may have reduced and your ability to refinance with your banking institution is now more difficult or no longer possible;
2. The value of your superannuation funds may have reduced. Your higher risk shares may have reduced in value even more. This means there is less superannuation to be split in a property settlement or it is fluctuating daily, more than usual;
3. Your valuations that were prepared before COVID-19 may no longer be current. You may now need updated valuations, but it is likely these will now be lower. In addition, valuations may now be disputed if the updated valuation is largely different;
4. You have lost your employment, or it is unstable with you having an imminent risk of redundancy; and
5. You have not lost your employment, but your income has reduced.

If you are experiencing one or more of the above, you may have options to renegotiate or set side your property settlement, spousal maintenance or child support obligations.

What to do if you can’t comply with your family law property settlement obligations

Have you finalised a property settlement with your former spouse or de facto partner and have concerns that it may not be practical or possible to meet your obligations due to your recent change in financial circumstances? If so, there may be opportunities for you to renegotiate, or set aside your original property settlement.

If your property settlement was by way of Court Order

Section 79A of the Family Law Act 1975 provides grounds for a party to set aside / change a property settlement.

In relation to COVID-19, we have identified there are two main grounds which may apply:

• Due to a change in circumstances, it is impracticable for an order to be carried out (Section 79A (1) (b)); and/or
• One party has defaulted in carrying out the obligation(s) imposed by the original order(s) and in the circumstances arising as a result of that default it is just and equitable for the Court to either vary or set aside the order and make another order (Section 79A (1) (c)).

It is important to know that the Family Court will not set aside or vary orders where the parties are simply unhappy with the orders made or to overturn a “bad deal”.

If your property settlement was by way of Binding Financial Agreement

Section 90K of the Family Law Act 1975 provides grounds for a party to set aside a Binding Financial Agreement.

In relation to COVID-19, we have identified there are two main grounds which may apply:

• The agreement is void, voidable or unenforceable (Section 90K (1) (b)); and / or
• Circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out (Section 90K (1) (c)).

As renegotiating or setting aside a property settlement is a complex area of law, we highly recommend that you book in for a free consultation with one of our experienced family lawyers. We can discuss with you your options and prospects based on your current financial situation and the relevant legislation.

What to do if you can’t comply with your spousal maintenance obligations

Under the Family Law Act 1975, a party to a marriage or de facto relationship is liable to maintain the other party to the extent that they are reasonably able to do so, provided that the other party is unable to support themselves.

To change an obligation to pay spousal maintenance, the Court must be satisfied that there has been a change in one of the parties circumstances to justify a change. Your loss in employment or in income may be relevant in seeking a modification, however, it also depends on the extent and duration of the reduction in income.

It can be a complex area of law to navigate, therefore, we highly recommend that you book in for a free consultation with our experienced family lawyers who can discuss with you your options and prospects based on your financial situation and the relevant legislation.

What to do if you can’t comply with our child support obligations

Child support is usually calculated based on a party’s income and nights they have the child/ren for. Similarly to the reasons listed above, if you have lost your employment or your income has reduced, you may be able to change your child support obligations depending on which type of child support obligation you are bound to.

If your child support is calculated through the Child Support Agency / Services Australia

You are entitled to regularly update the Child Support Agency / Services Australia as to your change in circumstances, i.e. new income or loss of income. This will accordingly modify your legal obligation to pay child support. If you need assistance with this, please contact our office.

If your child support obligation is pursuant to a Limited/Binding Child Support Agreement

Section 136 of the Child Support (Assessment) Act provides various grounds to set aside a private child support agreement.

The main ground relevant to loss or reduction of income, is that exceptional circumstances have arisen since the Agreement was made, such that the child or the applicant (you) will suffer hardship if the Agreement remains in place (Section 136 (2)(d) of the Child Support (Assessment) Act)).

Please note that setting aside a child support agreement can be quite complex and therefore, we highly recommend that you book in for a free consultation with our experienced family lawyers who can discuss with you your options and prospects based on your financial situation and the relevant legislation.

Our family law team

Our family law team and the Family Court continue to operate during the COVID-19 pandemic.

Our family law team have extensive experience in the above matters and highly recommend that if you are unsure or unable to comply with your family law obligations, that you book in today for your free initial consultation to learn about your legal options. If possible, our team will preference resolving your matter through negotiation and mediation rather than court applications, which can be expensive and stressful.

Article written by Family Law Partner, Reece Ramsden