On behalf of Cooper & Tanis, P.C. posted in divorce on Friday, March 31, 2017.
Colorado residents might be familiar with Chapter 13. This form of bankruptcy allows debtors who have a reliable source of income to restructure their obligations under a repayment plan that lasts from three to five years. After the successful completion of the plan, many remaining unsecured debts are discharged. Earlier in March, a Georgia bankruptcy court examined the interplay between these plans and a divorce decree.
In the case, a man filed for Chapter 13 shortly after the divorce order was issued. Part of the decree was that he would be required to pay a stated amount each month in child support. He was also ordered to pay his ex-wife $53,000 as part of a property division settlement. The divorce order included the stipulation that the property settlement could not be discharged in a subsequent bankruptcy.
Perhaps because of his attorney’s advice, the man knew that child support obligations are not dischargeable in bankruptcy, so he did not include them in his schedule of debts to be addressed in the repayment plan. However, he did include the $53,000. His ex-wife filed a motion with the bankruptcy court referring to the court order and seeking a declaration that such amount could not be discharged. The court denied her request, stating that a state family law court did not have the jurisdiction to dictate the terms of a bankruptcy, and that the order was a public policy violation.
This case shows that a divorce can have legal ramifications beyond what the parties originally contemplate. People whose marriages are ending may want to have their attorneys review the wording of a divorce decree before it becomes effective.