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Bankruptcy law trumps family court

There are certain obligations that are not dischargeable when Florida residents file for bankruptcy under Chapter 7 or Chapter 13. In the case of a debtor who has gone through a divorce, two of these are child support and alimony. However, other obligations that have been incurred as a result of a divorce usually are dischargeable. A ruling that was issued in early March by the U.S. Bankruptcy Court for the Northern District of Georgia has affirmed that this is the case regardless of what kind of language is contained in the divorce order.

That case involved an estranged couple whose divorce had become final. The divorce order had included a requirement that the ex-husband pay a stipulated amount in monthly child support as well as another amount as part of the property settlement. The order contained specific language to the effect that the property division amount would not be subject to discharge in a subsequent bankruptcy.

Shortly after the divorce was finalized, the ex-husband filed for Chapter 13. He included as part of the repayment plan the amount required to be paid in the property division settlement. Under Chapter 13, any eligible unsecured debt that remains outstanding after the completion of the plan is generally discharged. The ex-wife filed a motion in the bankruptcy case seeking a declaration that, due to the family court order, the property settlement obligation would not be dischargeable. The bankruptcy court ruled that, as a matter of public policy, a state family court could not dictate what a federal bankruptcy court could do.

This case shows that there can be other aspects of ending a marriage that one or both parties may not envision or fully understand at the time. A person who is in this position may want to meet with an attorney to see if classifying a property division payment as support may provide some protection in the event that the obligor subsequently files for bankruptcy.

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