In divorce actions, hiding martial assets is bad faith. Courts deal with secretion of assets individually, on a case-by-case basis. Hiding assets, which is considered an intentional attempt to deceive the court, may result in a larger property award to the other spouse.

The reckless and deliberate dissipation of marital assets -- for example, gambling marital funds away in a careless fashion or making a large charity contribution -- may also be evidence of bad faith.

Frequently, courts face parties who manifest bad faith by obstructing the process of law by foot dragging in connection with legitimate discovery, or making misrepresentations. In the United States, domestic relations courts may award counsel fees and costs to a litigant based on good faith, bad faith, need and ability to pay, and courts consider bad faith in imposing sanctions against an offender.

Courts try to deter bad faith with the threat of attorney fees, which they may award against a party who raises unnecessary issues.

Bad faith often stops this side of fraud. Fraud means acting in bad faith, but all actions of bad faith are not fraudulent. Fraud includes actions, direct and indirect, by which one part improperly exploits another. It includes acts deemed "bad," which are malfeasant; omissions, which are nonfeasant, and misrepresentations that induce someone of act with reliance but to his or her detriment.

Courts view elective unemployment or underemployment as evidence of bad faith in the calculation of child support.

Courts sometimes deal with bad faith in connection with bankruptcy of one spouse after a divorce. One spouse may do this in an attempt to avoid making payments in connection with distribution of property. A New Jersey appeal court dealt with this gambit in Borzillo v. Borzillo, where after a divorce judgment in which the wife waived permanent alimony, the husband filed for bankruptcy in an attempt to dodge the property settlement obligations.

A bankruptcy judge denied discharge of these obligations because he found them to "in the nature of support and alimony," after which the wife sought counsel fees for a motion to enforce the terms the separation agreement and counsel fees in the bankruptcy proceeding. The court denied her appeal for bankruptcy fees, but increased both the amount and term of her present alimony and awarded $3,000 in her counsel fees in connection with the postjudgment state-level proceedings.

Moreover, the case included an explication of good and bad faith "when determining a spouse’s right to an award of counsel fees." These acts include "[a]n unwillingness to provide pendente lite support or contribute to the preservation of marital assets or the reduction of marital debt commensurate with one’s ability to pay"; [a]n unwillingness or intransigence ... to negotiate fairly an equitable distribution of property legally and beneficially acquired during the marriage or child support commensurate with one’s ability to pay"; [t]he intentional noncompliance with a voluntary agreement or with court-ordered obligations." The court then said "evidence of bad faith" can be supported by these actions: "[t]he misuse or abuse of process to evade obligations arising out of voluntary agreements"; [t]he seeking of relief for which one knows or should know that no reasonable argument" can be made; [t]he intentional misrepresentation of facts or law designed or intended to discharge unfairly or improperly limit equitable distribution of alimony, maintenance, or support obligations"; and acts by a losing party that are "vexatious, wanton, or carried out for oppressive reasons."

In Borzillo v. Borzillo, the court said that while bankruptcy is constitutionally protected, "the husband could nevertheless be found to have acted in bad faith by attempting to gain a discharge which he knew or should have known was not available to him."

The court rebuked the husband, who, it said, "was not satisfied with a bargain that relieved him of life-time alimony payments. Instead, he opted of what he thought would be a legal end run around his obligations, notwithstanding ’the obvious’ -- that such a gambit would jeopardize his child’s housing and would torpedo any modicum of protection for which his wife had bargained away permanent alimony."

Compare Good Faith.

See also Dissipation of Assets; Secretion of Assets.

Your Suggestion

1. Staying On Top of Your Marital Finances
   Many spouses get stuck at the time of divorce, especially wives, without any knowledge of the finances of their marriage. In a circumstance like this, it is difficult to deliver the information a lawyer would need, but it is even more difficult to reveal whether or not an asset is being hidden. If a separation or divorce is inevitable, do your best to get up to speed on all the assets, bank accounts, company accounts, and investments as quick as possible.
   Contributed on 5/16/2007 by: DivorceDex.com Staff

   Category: Property Division   (Applicable in All States)

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