Divorce and Restraints Against Dissipating Assets

By Tadd Yearing, Esq.

In New Jersey, to prevent a party from dissipating marital assets or incurring unreasonable debt during the divorce, the courts require a party to file an application during the litigation seeking an injunction against the spouse acting in bad faith. The onus is, thus, on the parties themselves to seek the protection of the court.

Not all states agree with this procedure. In 2009, New York amended its laws to incorporate an automatic injunctive order into all matrimonial actions that is binding on both parties. (N.Y. Domestic Relations Law § 236 (B) (2)).  Under this framework, the plaintiff must simultaneously serve the defendant with the Complaint for Divorce along with an “automatic order” compliant with the statutory requirements. The order is deemed binding on the plaintiff upon filing and upon the defendant upon receipt of service.  The order remains in effect for the duration of the divorce action (unless terminated or amended by subsequent order of the court or written agreement between the parties) and, broadly, prohibits both parties from selling, transfering, encumbering, concealing, assigning, removing or in any way disposing of any marital property without the consent of the other party in writing, or by order of the court.

There is a certain common sense rationale to New York’s law, as it clearly is intended to reduce legal fees by making one of the most commonly requested, and almost always granted, forms of relief the default position of the parties.  It also sets an important tone for the discovery process, which can be riddled with gamesmanship and efforts to hide income or assets. While I am generally against the efforts by states to make the divorce process a “canned” event, and where New Jersey is often cited as one of the most progressive and cutting-edge jurisdictions in the country for its efforts to resist the one-size-fits-all mentality of other states, the notion of a mutual automatic restraint on the dissipation of assets is an instance where a less modern sister-state has an interesting idea at least worth considering.

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