Some Divorce Obligations can be Discharged in Bankruptcy

The old adage “the only guarantees in life are death and taxes” must have been uttered before the inception of bankruptcy. Bankruptcy is a legal status of a person or other entity that cannot repay debts to creditors. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. While child support obligations can never be discharged (i.e. erased) in bankruptcy, some payments owed by a former spouse under a Florida divorce final judgment can be discharged under Chapter 13 of the Bankruptcy Code. 

Chapter 13 bankruptcy allows individuals with a regular income to make a plan to pay their debts and to keep certain exempt assets, such as their car or home, if they have more equity in certain assets than they owe for them. Think of Chapter 13 bankruptcy as a reorganization whereas a Chapter 7 bankruptcy is a liquidation of assets to discharge the entirety of debts. Some applicable family law considerations to Chapter 13 bankruptcy are:

  1. Equitable distribution equalizing payments under a divorce decree can be discharged in a Chapter 13 Bankruptcy proceeding.
  1.   Marital debts not related to support obligations, such as alimony or child support, can also be discharged Chapter 13 Bankruptcy proceeding – regardless of what is stated in a marital settlement agreement.
  2. Future pension payments are protected from discharge via Bankruptcy as the non-filing ex-spouse’s share can be transferred to him or her through a Qualified Domestic Relations order irrespective of a Chapter 13 Bankruptcy proceeding. 

If considering a bankruptcy, consult an experienced family law attorney to take into consider all family law implications of this legal process.

Posted in
Share this:

Related Posts