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Man discharges property settlement obligations in bankruptcy

Florida residents who are divorced might wonder what will happen to some of their obligations if they file for bankruptcy. While they will still be required to pay things such as spousal support, on June 13, a bankruptcy court found that a debtor's obligations to his ex-wife regarding a property settlement were dischargeable.

The man in the case had filed for Chapter 13 bankruptcy. He and his ex-wife had previously agreed that they would not make any support or maintenance claims. His ex-wife attempted to argue that the indemnity agreement the two had was in the nature of alimony, support and maintenance, but the court said that she failed to prove her case. In reaching its decision, the court also considered both parties' financial situations and other factors.

The crux of the dispute was over the home the two had owned together. The man had agreed to take on the mortgage and other financial obligations but had failed to remove his former wife's name from the mortgage. The man failed to make payments on time or sell the home, and she argued that this had hurt her financially.

As this case demonstrates, a divorce decree does not remove a person's obligations to pay a mortgage. A person who is divorcing and who shares a home with a spouse might want to discuss the process of being removed from the mortgage, splitting retirement accounts, dividing debts and other issues with an attorney who has experience in negotiating property division settlement agreements. The party who ends up keeping the house can transfer other assets to compensate the other party for the loss of equity.

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