Articles Posted in Divorce Finances

spousal-support-job.jpgIn Part One of this blog, I discussed the issue of income imputation (often referred to as earning capacity) in child support cases. The focus of the article was about your options if the other parent voluntarily quit their job and was seeking a modification of child support. As that blog explained income imputation (assigning income to a party that is not actually earned) is fairly straight forward based on California’s significant state interest of ensuring parent’s support their children. If you missed this blog, and you are facing a modification of child support based on the other party voluntarily quitting their job, I highly recommend you go back and read that blog.

But what happens if there are no children; or as is typically the case, there are orders for child and spousal support? Can you still seek to impute income at a party’s previous income when they voluntarily quit their job? The short answer is yes you can.

Family Code Section 4320(c) lists the earning capacity of the supporting spouse as one factor to consider in making spousal support orders. [“The ability of the supporting party to pay spousal support, taking into account the supporting party’s earning capacity, earned and unearned income, assets, and standard of living. Family Code ยง4320 (c)]

Although Section 4320(c) speaks of earning capacity, the code does not specifically define what it means. For that answer we look to the case, Marriage of Simpson In Simpson, the California Supreme Court stated “‘[E]arning capacity’ represents the income the spouse is reasonably capable of earning based upon the spouse’s age, health, education, marketable skills, employment history, and the availability of employment opportunities.”

spousal-support-who-pays.jpgMany of the same principles associated with the imputation of income with regard to child support apply to the imputation of earning capacity for spousal support. Just as with child support, the three-prong test of ability, opportunity and willingness that is found in Marriage of Regnery must be proven for spousal support as well. This also includes the principal that no finding of “bad faith” is required to support an imputation of income.

For a very long time, the Courts held that there needed to be a finding of bad faith, or in other words a deliberate attempt to avoid paying spousal support, before a court could impute income for spousal support purposes. This holding came from the case Philbin v. Philbin (1971) 19 Cal.App.3d 115. And yes, it is the same Philbin your thinking of as you read the case name.

In Philbin, Regis Philbin was working as a comedian in the late 1960’s, but his income had fallen dramatically since he left as Joey Bishop’s sidekick on the nationally syndicated “The Joey Bishop Show.” At the time the case was heard by the trial court, Regis’ annual income dropped from $95,000 per year to $27,000 per year (or $635,000 a year to $181,000 in 2014 dollars.) The Court of Appeal ultimately held that imputing income to Regis was not warranted since there was no bad faith on his part.

However, more recent case law suggests that the requirement of a bad faith finding for the purpose of proving earning capacity is no longer required.

It is important to note the Appellate Court has refused to impute income to a supporting spouse who voluntarily quit his job when the decision was based on a decision to follow a path of good works and services. In Marriage of Meegan (1992) 11 Cal.App.4th 156, the court upheld the trial court’s reduction of spousal support for a spouse who quit his high paying executive position to pursue a life in a monastery as a Catholic priest. The court held, the “[r]eduction [was] appropriate where Husband [was] acting in good faith and did not resign [his] job to avoid [his] spousal support obligations.” It is important to note that Meegan addressed only a spousal support order and child support was not at issue. In fact, Mr. Meegan voluntarily agreed to pay $875 per month towards his 2 adult children’s college expenses. I believe if child support were at issue in the Meegan case, the court would have made a different finding.

The Meegan case is an interesting example of a situation where the Court refused to impute income to a party who voluntarily quit their job and depressed their income. It also illustrates how very fact specific income imputation case can be. It is important to contact a qualified attorney to review your case and specific set of facts to determine whether an income imputation is appropriate.

The Court’s authority to impute income to a party is not limited to situations where the party quit their job. If one party refuses to get a job, or has been unemployed for a long period of time, the court may consider imputing earning capacity in these situations as well. In this situation, the party who wants to impute income will need to seek the assistance of an expert, called a vocational evaluator, to provide evidence of the 3 factors discussed above.

Spousal support requests, especially when they involve a request to impute earning capacity to a parent, can be difficult to navigate without the assistance of skilled family law attorney, so it is important to discuss your case with a qualified attorney.
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divorce-life-insurance.jpgAt the beginning of each divorce case, the parties always have questions regarding how the divorce will impact their daily lives, especially their finances. One of the biggest issues, and often most disputed, is support. The parties cannot plan for their separate futures until they know whether a support order will be made and the level of support which will be ordered. Once the parties have a support order or agreement they will next consider what that support amount is intended to cover? Will my spouse have to continue paying my health insurance? Will my spouse pay for our children’s health insurance? Will my spouse pay for uncovered medical and dental expenses? Will my spouse pay for extracurricular activities? Will my spouse pay for childcare? Typically these are the main concerns for divorcing parties when discussing support issues. However, it is not uncommon for family law litigants and their attorneys to forget one important issue – support in the event of the death of the paying spouse.

Life insurance can be an uncomfortable topic of discussion; however, the issue of life insurance is an extremely important subject to include in divorce settlement negotiations. In the event that the parties cannot reach a full agreement regarding all issues, they can ask the court for orders. The court has jurisdiction to address the issue of life insurance and to make appropriate orders for the parties. In cases where child and/or spousal support amounts are relatively high, it is reasonable to consider insuring the paying spouse as a form of security for support. In high conflict cases the supporting spouse may be hesitant to agree that his or her former spouse will be the beneficiary of an insurance policy on the supporting spouse’s life. The supporting spouse often says “I don’t want to give my former spouse more incentive to kill me”. This type of argument will not likely be given much weight by a family court judge.

divorce-insurance.jpgThrough agreement or court order, once the parties determine that the supporting spouse’s life should be insured as security for support, the attorneys and clients should discuss the amount of policy and which party should be responsible for the premiums. In cases where the parties take out life insurance as security for child support, the supporting spouse may be ordered to pay the life insurance premiums in the form of additional child support. If available, the parties often agree that the supporting spouse shall maintain a currently existing life insurance policy. The total amount of insurance should be based on the monthly support obligation and the number of years support will likely be paid. Each case is unique; therefore, it is important to discuss the issue of life insurance as security for support with an experienced family law attorney.
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New-Year-Divorce.jpgAlong with the New Year comes a plethora of New Year’s resolutions. Most people chose a resolution like exercising more, eating less or starting a new hobby. Some are able to stick to their resolution the whole year while other barely make it through the first of the year. For divorced individuals, there are a handful of resolutions that could put you on the right track for the upcoming year if you can resolve to stick to it throughout the year. These resolutions focus on improving your post-divorce relationships with your ex-spouse, your children and yourself.

Whether you just wrapped up your divorce or you have been divorced for quite some time, there is always room for improvement in the following areas.

1. Attempt to Communicate Better with Your Ex-Spouse
Divorce is filled with a variety of emotions, typically emotions that include a whole lot of anger and resentment. After the divorce is finalized you might have a bitter taste in your mouth and want nothing to do with you ex-spouse. However, if you have kids, chances are you aren’t quite done seeing or speaking with your ex. Do yourself a favor and make a resolution to work on communicating better with your ex-spouse. Simply avoiding the snarky emails to your ex can put you in a step in the right direction. And if you’re up to it, perhaps you could try going to lunch with your ex-spouse. This will give you an opportunity to catch up on the children’s activities and exchange information. Better communication will inevitably lead to better co-parenting.

New-year-kids.jpg2. Put your Attention on Your Kids, Not your Ex-Spouse
Chances are you have spent a whole lot of time thinking about your ex-spouse…thoughts about what you could have done to make it work or thoughts about how upset you still are with him/her. Well it’s a new year and that means its time to shift your focus to your kids! Whether they show it or not, your kids have gone through a lot of change as a result of your divorce. Putting more attention on your kids can help them adjust in the New Year.

3. Limit Sharing Your Private Life on Social Media
Although Facebook, Twitter and other social media sites offer you the perfect opportunity to just say what is on your mind and let the whole world know about it, resolve to stop “bashing” your ex-spouse through your status updates. Also, if your ex-spouse can still view your social media profiles think about putting a halt to posting intimate details of your new relationship. If there were unresolved feelings between the two of you, this will give your ex-spouse a chance to heal without stirring up more feelings of anger and resentment.
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financial-disclosure.jpgWe often blog about the statutory requirement in all California divorces for divorcing parties to exchange complete financial disclosures. The required disclosure documents consist substantially of an Income and Expense Declaration and a Schedule of Assets and Debts. Through the completion of these documents, the parties are obligated to provide all material facts and information regarding their income, expenses, assets and debts. Failure to complete these forms in accordance with the highest duty of good faith and fair dealing may result in severe sanctions imposed by the court. Considering these strict requirements, the California Court of Appeal surprised family law attorneys in a recent case, In re Marriage of Evans, in which it held that the parties could reach enforceable divorce settlements prior to the exchange of the financial disclosure documents.

In Evans, prior to filing for divorce, the parties negotiated and signed a “pre-divorce agreement” which divided their interest in the marital residence. After a Petition for Dissolution was filed, Mr. Evans filed a motion to set aside the parties’ pre-divorce agreement. Mr. Evans argued that the agreement was invalid because the parties did not exchange their disclosure documents prior to its execution. The trial court disagreed with Mr. Evans and held that the pre-divorce agreement was valid and ordered its terms to become part of the Judgment of Dissolution. Mr. Evans appealed the trial court’s decision and lost again. The appeals court held that the financial disclosure statutes only were intended to apply after service of a divorce petition.

pre-divorce-agreement.jpgWith the Evans ruling now a published opinion, there is a loop hole for parties who wish to enter into property agreements prior to exchange of disclosure documents. It is important to note that Evans does not extinguish the requirement for both parties to abide by the disclosure statutes once a divorce has been filed; it only addresses agreements made prior to filing for divorce. In addition, pre-divorce agreements made in contemplation of divorce may be set aside for various other reasons. If you and your spouse would like to enter into a pre-divorce agreement, but are not yet ready to file for divorce, it is important to consult with an experienced family law attorney prior to executing any agreement. The right attorney can help you draft an agreement that will be enforceable in the event of divorce.
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home-loan-divorce.jpgGetting through a divorce and preparing to move on from a marriage is an emotionally and financially draining process. However, if all of the issues were handled correctly, you should be able to make a new start and begin building your new future without your former spouse. Unfortunately, sometimes important issues fall through the cracks because they were not within focus for the parties at the time they negotiated their settlement. If you want the ability to purchase a new home after divorce, below are some considerations which must be addressed at the time of settlement or trial.

It is not uncommon for divorced parties to discover that they are still liable on their old home loans when they approach a bank for a loan on a new home. In many San Diego divorces, one party buys the other party out of their interest in the parties’ home and remains in the marital residence (often with the children). When the parties reach these types of agreements, their settlement documents might only contain a provision awarding the home and all encumbrances to one party with a simple “hold harmless” clause. This means that the party retaining the home is responsible for all obligations encumbering the home. However, this provision is irrelevant to the creditor who holds the note on the loan. The creditor can still seek payment from either party. The only way to get off of your home loan is to sell the home or have your spouse refinance the home into his or her name alone.

home-loan-checkbook.jpgDepending on your finances, if you are still liable on a home loan, you will likely not qualify to purchase a new home even if your spouse is responsible for the debt. It is important to talk to a certified family law specialist regarding this issue before your divorce judgment is finalized. If your spouse will not qualify for a refinance in his or her name alone, you may want to consider selling the home so that you are able to separate that one remaining financial tie. If your spouse may qualify for a refinance, ensure that your divorce judgment has appropriate provisions in place regarding transfer of title and a deadline for the refinance. For example, you can require that your spouse refinance the home within 120 days of execution of the settlement. If your spouse does not refinance, the home will be listed for sale. If your spouse does complete the refinance, you will execute a quitclaim deed transferring title to his or her name alone.

If you do agree to a buy-out by your spouse and your spouse is unable to refinance the home, it is important that your name remain on title to the home. Review your settlement documents carefully to ensure you are not required to transfer title without your removal from all related loan obligations.
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divorce-asset-division.jpgAfter 23 years of marriage, Kris Jenner filed for divorce from Bruce Jenner. Sources say that Bruce “celebrated” his upcoming freedom by dropping $50,000 on a new NASCAR-approved UTV race car. Although the Jenners’ divorce documents allege that their date of separation was back in 2013, a significant impulse buy before their divorce is even close to final could potentially cause some problems, when it comes to division of their property.

When couples go through a divorce, the court (or the parties via settlement) will make decisions about how to divide their assets and debts. Since California is a community property state, assets acquired during marriage are considered community property and thus subject to 50/50 split between husband and wife. Assets acquired before marriage or after the parties’ date of separation, on the other hand, are considered separate property of the spouse who acquired it. However, issues can arise when a significant asset is purchased after the couples’ separation but before their divorce is finalized. For instance, purchasing a new vehicle after separation may complicate a divorce as it relates to disclosure of assets and determining whether the new vehicle is indeed separate property.

divorce-calendar.jpgOne potential issue with purchasing a new car after separation is inadequate disclosure. Once a spouse files for divorce each spouse will be required to draft and exchange Preliminary Declarations of Divorce (“PDODs”). One aspect of the PDODs is the Schedule of Assets and Debts, which outlines all of the parties’ assets and debts, including vehicles. If you have already exchanged your PDODs and then later purchase a new vehicle (before the divorce has been finalized), then you will need to disclose this new purchase to your spouse. You will likely need to augment your Schedule of Assets and Debts to reflect the new asset. The new vehicle will also need to be addressed in your Martial Settlement Agreement. It’s important not to omit any of your assets from your final divorce paperwork, even if you are sure that the asset is your separate property.

Another potential issue with purchasing a new car after separation is determining whether it truly is separate property or not. If the date of separation is a contested issue, then determining whether the new car was purchased “during marriage” or “after separation” may be quite a problem. If you and your spouse cannot agree on a date of separation then it may need to be litigated in court. Once the date of separation is decided and it is clear that the vehicle was purchased after that date of separation, it does not mean that you are home free. You then need to look at the source of the money that was used to buy the vehicle. If you used your earnings that you acquired after separation then the source of the money was separate property. But if you used money from a joint account that you and your spouse acquired during marriage or if you traded in a community property car, then the new vehicle might not be your separate property.

It may be best to simply avoid buying any significant assets before your divorce is final. Unfortunately, divorces are often dragged out over a couple of years or more and thus it is unrealistic for parties to avoid making new purchases. Luckily for the Jenners, sources say that the couple has already reached an amicable settlement regarding the division of all of their assets, so it doesn’t look like Bruce’s recent vehicle purchase will pose that much of a problem.
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PDOD-divorce.jpgAfter you retain a family law attorney and file your petition or response for dissolution or separation, one of the first things that your divorce attorney will likely do is hand you a blank Form-150 and Form 142 and ask you to start gathering a plethora of documents related to your income, assets and debts. This can be very overwhelming for clients, especially those who are still dealing with the emotions and shock of grasping that they are about to go through a divorce. Consequently, the importance of preparing complete and accurate preliminary declarations of disclosure (“PDODs”) is often ignored because it appears to be a very daunting task for divorcing spouses.

Family Code Section 2100 specifically states that “a full and accurate disclosure of all assets and liabilities in which one or both parties have or may have an interest must be made in the early stages of a proceeding for dissolution of marriage or legal separation of the parties, regardless of the characterization as community or separate, together with a disclosure of all income and expenses of the parties.” It’s important that the parties get started on their PDODs right away because pursuant to Family Code Section 2104, the petition must serve his/her within 60 days of filing the petition and the Respondent must serve hers/his within 60 days of filing the response. Also, having PDODs allows the parties to move forward in identifying potential issues of dispute and resolving financial issues early on.

The PDODs are comprised of the following:

1) Declaration of Disclosure (FL-140): This form is signed by the party and is simply a summary of the attachments enclosed with the PDODs. You will note that all tax returns (personal, corporate, etc.) filed in the past two years need to be included.

2) Income and Expense Declaration (FL-150): This form is a summary of the party’s current income from all sources and his/her monthly expenses. Paystubs from the past two months need to be attached to the form.

3) Schedule of Assets and Debts (FL-142): This form sets forth a summary of the party’s assets and debts. Many people think that their separate property doesn’t have to be disclosed; however, all known assets and debts, including your separate property, community property and your spouse’s separate property that you know of must all be disclosed. This means all tangible and intangible items ranging from a residence to airline frequent flyer miles to student loans. Along with each asset or debt listed, you need to attach supporting documents. You may redact part of the account number on the account statements to protect your privacy.

4) Declaration Regarding Service of Preliminary Declaration of Disclosure (FL-141): This form is confirmation that of the date that you served your PDODs on the other party.

5) Proof of Service (FL-335): The proof of service is what is actually filed with the Court to let the Court know when you served the other party with your PDODs.

Failing to have complete and accurate preliminary declarations of disclosure can lead to potentially significant monetary and other sanctions. However, if you serve your PDODs and later realize that you have changes or updates, you can amend your PDOD at any time. However, you must file a Proof of Service of each amendment with the court.
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house-valuation-1.jpgThe family residence is sometimes the parties’ biggest asset acquired during marriage. It is also typically an asset that one or both of the parties feel very attached to. When going through a divorce, the parties will have to decide whether to sell the house, continue to co-own it or have one spouse keep the house and “buyout” the other spouse’s interest in the house. A “buyout” is typically an attractive option when there are kids involved and the parent staying in the house wants to continue to provide continuity and stability for the kids. It is also an appealing option if the market conditions don’t favor the seller at the time. To “buyout” the other spouse means that the house will be assigned a certain value and the spouse not keeping the house will instead receive a percentage of the that value less the debt. The buying spouse either pays money to the selling spouse or gives up other marital property in the amount of the selling spouse’s share. Thus, the fair market value of the home makes a big difference on how much the “buyout” will cost the selling spouse.

There are a few different ways to value your marital residence. It is important for the valuation to be as fair and accurate as possible. Typically parties either get the residence appraised, have a realtor do a comparative market analysis or the parties do individual research based on online websites.

If the parties choose to value the home based on individual research, they will typically use an online website such as or, which gives immediate estimates of the home’s value. The parties can also ask a real estate agent to perform a Comparative Market Analysis, for little or no cost, which provides information about recent sales prices of comparable houses in the neighborhood. Then you can you’re your home’s value on those comps.

However, not all houses are the same, and thus comps and online websites are not always the most accurate way to determine the fair market value of a house. Instead, the most accurate way to determine the fair market value of a house is to have an appraisal done by a neutral and licensed appraiser. Of course this method will cost the parties a small chuck of change. The parties can either agree on a joint appraiser and perhaps split the cost, or they can each pay to have their own appraisers do an appraisal and split the difference between the fair market value. The cost of an appraisal is usually worth it to make sure that you are using an accurate number to value your home and thus calculate the buyout amount.
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divorce-questions.jpgThinking about or talking about the possibility of divorce is very different than actually taking affirmative steps to file for divorce in Family Court. Moving forward with this step can take a significant amount of mental and emotional strength. If you’re still in the thinking or talking stages of a potential divorce, ask yourself the following questions to help determine if you are ready to take the next step and file for divorce from your spouse.

1. Are you Facing a Hard or Soft Problem?
The need for a divorce may be more immediate if you are in a situation where you are facing a “hard problem” as marital therapists like to call it. “Hard problems” include situations in which you are facing abuse from your spouse or your spouse has an untreated addiction. If this is the case, you may want to act fast and stop just dwelling on the possibility of divorce. However, if you are facing a “soft problem” maybe you need more time to decide if you and your spouse can work on the problem or if a divorce is the preferable option. “Soft problems” include things such as feeling as if you’ve grown apart from your spouse, that you’re unhappy in the relationship or that you aren’t in love anymore.

2. Are You and Your Spouse Even Compatible?
What are your odds of succeeding as a married couple? Perhaps taking a “Rate Your Mate” quiz ( will help you determine if you’re destined for doom, in which case you might as well just go ahead and prepare those divorce papers. The “Rate Your Mate” quiz tests areas such as common interests, money, mutual respect and personal safety, which are common issues that many couples face.

3. Should You Stay Together for the Kids?
There are two opposing schools of thought: 1) stay together because divorce is destructive to children; or 2) get a divorce because if the parents are happier the children will ultimately be happier. If you are contemplating divorce and you have children with your spouse then you should think about whether it’s in your children’s best interest if you stay with your spouse or split. Many couples prefer to wait until their children have turned 18 and left for college before they decide to get a divorce. But if your children are young, this might not be a realistic option for you. Also, if your marriage is filled with havoc and constant fighting then staying together for the kids might actually be hurting, rather than helping your kids.

4. Are You Ready to Part With Some of Your Stuff?
Your house, your cars, your furniture and furnishings…these are all things that were likely acquired during your marriage and will be subject to division during a divorce. Getting a divorce means parting with some or all of these “things” in order to divide assets with your spouse. For instance, in many divorces, where one party cannot afford to keep the home and “buy out” the spouse, the family home will need to be listed for sale. Even though you can likely negotiate with your spouse to keep certain items or assets, you will need to accept the reality of parting with some of your stuff. If this idea seems too traumatic for you then you should re-evaluate whether or not a divorce is the route that you want to take.
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saving-money.jpgAs a family law litigator, I see on a first-hand basis how much clients are shelling out just to get a divorce. The entire process can very quickly take a dramatic toll on someone both financially and emotionally. In today’s economy, most of us don’t have unlimited funds set aside to spend on a divorce. Instead, we would rather save our pennies for our children’s college education, our retirement, our mortgage, paying off student loans, etc. If you are in this situation, consider the little-known secrets below from an attorney’s perspective to help you save money on your divorce case.

Organize Your Documents for Your Attorney:
Often times, clients will just drop off a pile of documents that we have to sort through and try to make sense of. Keep in mind that your lawyer will never know your life as well as you do. So make it easier on your lawyer by providing him/her will a three ring binder with tab dividers and make a tab for each of your assets and their supporting documents. This will allow your lawyer to draft your declarations of disclosure much quicker and will reduce the amount of times your lawyer has to call you to get additional documents and information.

Don’t Use Your Lawyer as a Therapist:
Sending lengthy emails to your lawyer about non-relevant legal matters or talking on the phone with your lawyer for hours about your situation will only serve to rack up your attorney fees. Unless it’s truly relevant to your case, don’t copy your lawyer on emails between you and your spouse. And think about getting a therapist to talk to instead of your lawyer. Chances are your therapist’s hourly rate will cost much less than your lawyer’s.

Email Your Lawyer Instead of Calling or Meeting in Person:
Most divorce lawyers charge an hourly rate. If you call your lawyer, he/she likely won’t be available immediately and will instead need to schedule a phone call for a later time. Chances are that preparing for and taking the phone call will take more time than simply responding to an email. Same thing goes for meeting in person. If you just have a few simple questions that need to be answered, a quick email will likely take less time for your lawyer to review and respond rather than meeting with you in person.

Talk to Your Spouse:
It may seem impossible to talk to your spouse if you are amidst a heart-wrenching divorce. But if you can figure out a way to amicably talk to your spouse you will have a chance to settle smaller issues, like the division of household furniture or your frequent flyer miles, without accruing more attorney fees.

Separate Panic from a True Emergency:
Think about whether your situation truly warrants a phone call to your attorney. Perhaps a phone call to the police would better serve your interests. Or if it’s 4:00 pm on a Friday and you know that your attorney won’t be able to go to court or get ahold of opposing counsel, perhaps you should wait it out.

Choose Your Lawyer Wisely:
Choosing the right lawyer can make all the difference in your divorce case. You want to choose a lawyer who will see you as a valuable and important client at the firm. Hiring the biggest firm in town might cause you to get your case ignored if you don’t fit or exceed their client profile. Also, keep in mind that a lawyer who practices exclusively in family law and is a certified family law specialist will likely have more knowledge about the divorce process than a lawyer who just does family law on the side.

Unless Truly Necessary, Avoid Changing Lawyers Mid-Divorce:
If you change lawyers mid-divorce, your new lawyer will have to charge you to review your file and try to catch up, which will likely cost you a considerable amount of money that could have been avoided by just sticking with your original lawyer.
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