Don’t overlook home equity lines of credit (HELOCs) when assessing income.
Case in Point: A self-employed individual had minimal deposits to his bank account, minimal checks written, and no credit cards. Accordingly, his income and cash flow appeared low for support purposes.
Through a forensic tracing analysis, it was discovered that he used his HELOC for almost all of his business income and expenses.
At first glance, the beginning- and end-of-year balances were not very different, typically indicating a low-priority area to investigate. But all checks from customers were deposited directly to the HELOC, reducing the amount borrowed. All business expenses were paid out of the HELOC, increasing the debt. By transacting his banking in this way, the income was almost missed by his spouse during their divorce.
Bottom Line: Be sure that your discovery requests include all home equity lines of credit for several years, and full monthly transaction histories for the accounts.