How to deal with maintenance disputes in the Cost-of-Living Crisis
A great deal of media coverage has been devoted to the Cost-of-Living Crisis in recent months and this led the Manders Law team to consider what is “coming over the hill” for our clients who comprise both payers and recipients of spousal maintenance, child maintenance or both. Lucy Nicholson a Solicitor at Manders law shares her thoughts and top tips below.
In our blog of 2020, when the economic challenges of lockdown were pressing, we discussed the issue of maintenance pending suit: https://www.manderslaw.com/moneys-too-tight-to-mention-maintenance-pending-suit-in-a-covid-19-climate/. We decided it was now time to revisit the subject of economic challenge to help readers who have ongoing maintenance liabilities avoid the temptation of ignoring the problems they may be experiencing until it’s too late, resulting in money that would be far better preserved for the benefit of the family, instead being spent on litigation.
If this is you the first thing to do is to honestly accept and understand that you are dealing with a “competition for resources”. In ecological terms this is the use of the same resource by individuals of the same or different species, when the supply of the resource is insufficient for the combined needs of all.
Put simply, when you find yourself in a situation where a basic need, for example for housing, fuel or food is not going to be met, the psychological effect can be very damaging and can lead people to behave irrationally and uncharacteristically aggressively. To avoid getting into this vicious and negative cycle read on for top tips and self-help strategies on how to achieve a better outcome in these types of disputes.
If you are a payer of maintenance, you may be worried about how you will meet your ongoing obligations to the family while also facing a huge rise in energy costs, escalating interest rates, and feeling the effect of inflation everywhere.
How sympathetic, you may wonder, is your ex-partner or the court going to be when:
- you try to explain that you can no longer make the “books balance” when once you could;
- the financial premise upon which the maintenance element of the financial order was made is now so completely out of date as to render it manifestly unfair.
Conversely, if you are a recipient of maintenance, you may already be experiencing:
- late payments from your ex under a voluntary agreement, or the terms of an order.
- requests (or even demands) that you should accept a lower amount than that previously agreed, leaving you struggling to meet your own outgoings.
Lucy’s Top Tips
Firstly, it is vital to understand the different types of maintenance you may be paying or receiving. Are you paying or receiving?
- child maintenance payments via the Child Maintenance Service (CMS); or
- “top-up” child maintenance, which is ordered by the court if you are a higher earner; or
- spousal maintenance payments, which are payments to a former spouse to (either wholly or in part) assist them in meeting their own income needs, which are separate to the needs of any children you may have; or
- payments by way of an informal agreement between you and your ex which is not legally enforceable
Let’s look at the issues that may arise in each of the scenarios above………
Child maintenance via the CMS- are you paying/receiving the right amount?
Child maintenance is commonly paid by one parent to the other in accordance with a calculation prescribed by the Child Maintenance Service by reference to the number of nights the children spend with each parent per fortnight; the paying parent’s taxable gross income and whether the payer is responsible for any other children. This system operates entirely outside of the jurisdiction of the court.
To assess whether you are paying or receiving the correct amount of child maintenance use the CMS online calculator: https://www.gov.uk/child-maintenance-service
The key piece of information that you will need is the paying parent’s income, which can pose difficulties if that person is self-employed; does not receive a regular salary; or you suspect earns more than they declare to HMRC, upon which the CMS rely to verify the data that is provided.
If you are the receiving parent (known as the “resident parent”) and suspect that the paying parent’s income is at least 25% more than the CMS believe it to be, based on the data they have, then the CMS can ask the paying parent’s employer or accountant to provide and verify the information. Equally, if the paying parent believes their income is 25% less than the CMS claim, again, proof of this will need to be provided. It is a criminal offence not to provide the information when asked, or to knowingly provide false information. The CMS will only consider change to income that is likely to be permanent or long-term.
If the information is not sent to the CMS a decision will be made on what the paying parent’s income is, and how much maintenance they should be paying absent the information. There are two methods available to the CMS:
1) a “best evidence assessment” and
2) a “default maintenance decision”.
A best evidence assessment means that the CMS will make a decision on what the paying parent’s income is based on the information which is available to them i.e., they will estimate it. Various pieces of information can be used, such as the most recent information they have about the paying parent’s income, or by way of official statistics from the Annual Survey of Hours and Earnings. The CMS will then use this income figure to calculate the amount of maintenance to be paid.
Alternatively, the CMS can make a default maintenance decision, which is a flat rate depending on the number of children there are.
“Top-up maintenance” by court order
If the paying parent earns more than £156,000 gross per year the court can order that the maintenance payments are “topped-up” i.e., that the child maintenance payments which are ordered to be paid to the other parent will be more than the maximum CMS calculation. This can be done in the context of financial remedy proceedings.
If a person has the benefit of a top-up order but the payer stops paying, then the receiving party can apply to the court to enforce the order. It is important to take action as soon as possible given that where arrears have been due for longer than a year, you will need the permission of the court to proceed with an application for enforcement.
The court can use a variety of different methods to enforce the order such as:
- a charging order – securing a debt against the debtor’s home or any other property they own
- a third-party debt order – ordering a third party, such as the debtor’s bank, to make payment to the receiving party from funds they hold on behalf of the debtor
- a warrant of control – to take control of the debtor’s possessions
- an attachment of earnings order – where the monies owed would be deducted directly from the debtor’s salary before they are paid
- Judgment summons – ultimately a debtor can be sent to prison if the circumstances are such that warrants it
You need to bear in mind what the debtor’s financial circumstances are, and which method of enforcement gives you the best chance of getting your money. You can also ask the court to decide on the most appropriate method of enforcement in specific circumstances.
Spousal maintenance by court order
The court can order spousal maintenance to be paid for a period which can be fixed or can be extendable on an application to the court. It will be clear from your order what amount is to be paid/you are to receive and for what period of time. As explained above, however, these orders can be varied in terms of amount (both up or down) if there is a good reason! On an application for variation the court has flexibility and a wide discretion as to how it will determine a review of the maintenance to be paid. It does not have to consider the matter as if it were making the original order all over again. It could conduct a “light touch review” or limit the factors which it considers relevant to the application. It is also important to remember that the other party could make a cross application to vary the order in the opposite way (either upwards or downwards). The court can also order the maintenance payments to be capitalised, i.e., it will order that the paying party provides a lump sum to the receiving party instead of ongoing monthly payments, if appropriate.
Remember if there are arrears the court, as explained above, can use a variety of different methods to enforce the order and secure the payment of arrears.
Variations of “top up maintenance” or spousal maintenance
Be aware that it is possible to apply to the court to vary “top-up maintenance” or spousal maintenance if there are any material changes in circumstances, such as a change in the financial circumstances of one of the parties. The court procedure to vary an existing order is largely similar to financial remedy proceedings, albeit it is a shorter procedure.
Court proceedings inevitably come at a cost. Both parties would still be required to comply with court directions to provide evidence about their assets, income and expenditure using a process of disclosure. The disclosure process must be complied with in full. It is not limited to the parties’ income and expenditure and will also include any other capital resources and investments which are available to the parties. So, try to reach agreement, if possible, to avoid this costly process.
Informal arrangements which are not legally enforceable in the event of non-payment
If you have an informal agreement to pay either child, spousal maintenance, or a combination of both to the other person, then it is all the more important that you speak to them to try and reach agreement and resolve any dispute that may have arisen. If no agreement can be reached, you will be required to start a formal process by making an application for:
- child maintenance through the CMS; or
- a “top up order”; or
- spousal maintenance; or
- a combination of the above
to ensure that monies you have previously been paying or receiving on a voluntary basis are independently determined to avoid further dispute and can be recovered going forwards.
So…… if you have the benefit of an order, or CMS calculation, or no order at all and the payer stops paying; or if you are the payer facing an application for an extension of the term over which maintenance is to be paid or an upward variation of the amount to be paid:
- Seek advice early on – address the issue head on and take legal advice on your options at an early stage. If you are a payer of maintenance and you think that you are not going to be able to make the payments that you are already obliged to make, then you might be able to negotiate a sum (through solicitors or otherwise) which is affordable for you and which also meets the receiving party’s needs.
- Try alternative dispute resolution (or ADR) – if you cannot reach an agreement then, depending on the circumstances, it might be appropriate to try meditation to come to an agreement, or consider other alternative dispute resolution methods, like arbitration, to avoid the costs and delays of the court system.
- Keep it proportionate – always balance the amount of legal fees being incurred against what you want to achieve – legal costs to vary maintenance orders can easily become disproportionate to the amount that you are trying to save by way of a reduction of your liability, or by the amount that you are looking to increase your maintenance, particularly if no agreement can be reached resulting in contested proceedings.
- Remember litigation is not risk free – it is important to bear in mind that there are inherent risks in any litigation, and it is possible that you will not achieve your objective. There is also the risk that the court will make a costs order against you if it feels that it is appropriate to do so in the circumstances of the case.
For an initial FREE consultation on any aspect of family law, call Manders Law on 01245 895 105 or email us here.
Note: this blog is intended to give an overview (rather than comprehensive guidance and advice) on your legal or financial position and is provided for information only. It is not an endorsement of any product or service provider.