There are many reasons that bankruptcy filing rates are so high. Clearly an unexpected job loss or reduction in earnings can lead many honest, hardworking people into a bankruptcy lawyer's office. When a job loss is coupled with a divorce, I think that the likelihood of bankruptcy by husband or wife goes up exponentially.
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Whenever I file a Chapter 13 on behalf of a client, I remind my client that five years is a long time, and that a lot can happen during the term of a Chapter 13. Marriage counselors reguarly opine that financial stress often leads to marital discord, so it should come as no surprise that the stresses inherent in a Chapter 13 will result in marital problems.
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My husband and I are filing a chapter 7 bankruptcy in Georgia. During the 1st consultation our lawyer notified us that the court would notify his ex-wife about us filing bankruptcy. She resides in South Carolina. We are up to date on child support and have never been late. The child support is not included in the bankruptcy. Why does she have to be notified? Shouldn't this be our personal business? Please explain if this is a law or something. Thanks!
Jonathan Ginsberg responds: the 2005 changes to the bankruptcy laws added a requirement that if there is a claim for a domestic support obligation in a case, the trustee (either the Chapter 7 trustee or the Chapter 13 trustee) must provide written notice (with certain required information) to (1) the holder of the domestic support obligation claim, and (2) the applicable State Child Support Enforcement Agency established by §§ 464 and 466 of the Social Security Act. A notice at the time of filing and a second notice at the time of discharge are required. In the notice to the holder of the domestic support obligation, the trustee must provide contact information for the State Child Support Enforcement Agency.
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I received an interesting question from a divorce lawyer:
I just filed a divorce complaint for a client. Her husband is talking to a bankruptcy attorney about filing for bankruptcy. He probably will not fit into a Chapter 7. Is there any reason that my client should file jointly with him or hold off the divorce? Thanks.
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p>A divorce lawyer called me today with a question about the impact of bankruptcy on a debtor's obligations under a divorce decree. The divorce lawyer represented a man who was the co-signer of a credit card along with his ex-wife. The divorce decree provided that the ex-wife would be responsible for payment of this credit card debt.
In December, 2006, the wife filed a Chapter 7 bankruptcy and included the credit card debt in her petition. She did not list the ex-husband as a creditor in the case and the ex-husband did not receive official notice of the filing. The husband's divorce lawyer wanted to know what, if anything, could the ex-husband do to protect his interests.
I responded by noting that Bankruptcy Code Sections 523(a)(5) and (a)(15) apply here. 523(a)(5) makes debts in the nature of alimony and support non-dischargeable where as (a)(15) provides that debts to a former spouse not in the nature of alimony or support but incurred by the debtor in connection with a divorce decree are not dischargeable.
Therefore, in my view, the ex-husband is a creditor by virtue of financial liability that he would incur if the debtor fails to pay the credit card debt.
I further advised my attorney colleague that she should contact the debtor's lawyer and inquire as to whether the debtor would consent to an Order holding the obligation to the ex-spouse as non-dischargeable in the Chapter 7. Arguably, 523(a)(15) and 727(b) make these debts non-dischargeable automatically, but I would feel safer with an Order from the bankruptcy judge formally holding that these debts are not discharged in bankruptcy.
I also ran this scenario by my colleague Shayna Steinfeld, a lawyer who practices in the area of bankruptcy and domestic relations law and she concurred with my analysis and added two additional points:
1) that this property division debt would be dischargeable in a Chapter 13 (pursuant to Section 1328(a)(2); and
2) that the automatic stay of Code Section 362 may not apply (per Section 362(b) if the credit card obligation was in the nature of alimony or support.
The bottom line – the debtor wife is not going to be able to stick her ex-husband with this credit card debt, although the ex-husband may need to protect his rights by filing an appropriate pleading in the bankruptcy court. The wording of the divorce decree here is also critical in determining how this credit card obligation will be treated.
Technorati Tags: bankruptcy and divorce, discharge of credit card debts, divorce decree and effect of bankruptcy, Shayna Steinfeld, who is a creditor?
Filed under Chapter 7 issues, Divorce and bankruptcy issues by
Several months ago, I was invited by my colleague Marvin Solomiany to speak at a Family Law seminar presented by the Atlanta Bar Association. Marvin explained that my role would be to discuss bankruptcy at the "hot tips" part of the seminar. It turns out that the "hot tips" presentation is where five lawyers take seven minutes each to brief the family lawyers (i.e. divorce) about our areas of specialty. Besides myself, there was an immigration lawyer, a real estate lawyer, a criminal defense lawyer and a business lawyer. As I commented to the crowd, if there is if there is speed dating in hell, five lawyers in 35 minutes is what you would get!
Filed under Divorce and bankruptcy issues, Georgia Bankruptcy by
The Georgia Supreme Court recently considered the issue of whether a debtor/ husband could be held in Contempt of Court in Superior Court for refusing to pay a joint marital debt. In the case of McGahee v. Rogers, the trial court denied the contempt motion on the grounds that (1) the debtor/husband had discharged his obligation to pay the debt and (2) because the debts had been discharged, contempt relief was inappropriate.
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The Georgia Supreme Court recently issued a decision in a divorce case called Benton v. Benton that has bankruptcy implications. In this case, Mrs. Benton filed a Chapter 7 bankruptcy in the middle of her divorce case. In her petition she revealed her pending divorce action but did not reveal on Schedule B (the personal property schedule) of her petition her right to alimony or property settlement. For bankruptcy purposes, a right to receive money from any source is an asset.
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I declared bankrupcy 3 years ago, and I am just now starting to get my finances in order. However, I just found out that my ex-wife will be declaring bankruptcy, and she has around $18,000 in credit card debt that she will be discharging.
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