What are the Penalties for Financial Misconduct During Divorce in North Carolina?

Financial misconduct is relatively common in a North Carolina divorce. This type of misconduct may take many forms, but it is always unacceptable. Besides being morally questionable, financial misconduct may also lead to certain legal consequences for the guilty spouse. But what kind of consequences might this spouse experience? Will they receive a simple slap on the wrist, or will they experience more dire consequences? Are these consequences financial in nature, or is it possible for them to be charged with a criminal offense? These are common questions among both the accused and the accusers.

Spouses face financial consequences for misconduct of an economic nature. The most obvious example is how the misconduct may be considered by family courts as part of the equitable division process. If one spouse engages in serious financial misconduct, the family court may decide to award the other spouse more of the marital estate. This is particularly common in relation to the willful dissipation of assets.

For example, one spouse may gamble away the family fortune during a particularly unlucky poker game at a casino. Or perhaps they spent almost their entire paycheck funding adulterous relationships – perhaps by showing their lover with expensive gifts. Maybe they simply destroyed valuable assets in a blind rage while suffering from the emotional impact of a pending divorce.

Whatever the case may be, these acts of financial misconduct can backfire on the offending spouse. Aside from a lower share of the marital estate during property division, the guilty spouse may also be ordered to pay more in alimony or child support. The latter is especially true if economic misconduct has clearly affected the children in a negative manner. These financial consequences are perhaps the most obvious penalties associated with financial misconduct.

It is extremely rare for spouses to face criminal charges as a result of their financial misconduct. Technically speaking, spouses owe each other a “fiduciary duty.” Violating this duty is against the law, but it is not considered a true criminal offense for the most part. Instead, it is approached within the confines of the civil divorce courts.

That being said, there are some examples of financial misconduct leading to potential criminal charges – or even incarceration. For example, billionaire Frederick Barclay was once threatened with prison time for failing to pay a settlement to his former wife. His charge was contempt of court, which means that he violated a court order. Although this occurred in the United Kingdom, spouses in North Carolina can also theoretically be charged with contempt of court in relation to financial misconduct.

It is also worth noting that a divorce may expose much more serious acts of financial misconduct, such as fraud, money laundering, wire fraud, and so on. Spouses who are highly motivated to hide funds may commit crimes in order to do so. A divorce may also reveal fraudulent business activities, such as Ponzi schemes or tax evasion. A wide range of financial documents are scrutinized by courts during divorce, and this can lead to various discoveries. Criminal charges may stem from divorces if these crimes are uncovered.

While financial penalties and criminal charges are certainly possible, the most notable consequence of financial misconduct is the complete lack of trust and legitimacy in the eyes of the court. Once the court sees that a spouse has committed financial misconduct, they will become extremely skeptical about all future statements made by the offending spouse. Suddenly, everything that this spouse says or does will be questioned by the court. Instead of assuming that this spouse has good intentions, the court will assume that they are continuing to commit financial misconduct.

In contrast, the spouse who was victimized by this financial misconduct will essentially enjoy special treatment and bias from the courts. This has the potential to drastically alter the outcome of a divorce, perhaps more so than financial penalties or even criminal charges.

Whether you have been accused of financial misconduct or you are the victim of this behavior, it always makes sense to get in touch with a divorce attorney in North Carolina for more guidance. Choose Arnold & Smith, PLLC, to discuss your unique situation in more detail. We know that financial misconduct has the potential to drastically affect your divorce proceedings, and we are here to guide you toward the best possible outcomes. Reach out today to get started with an effective action plan.