Miami Bankruptcy Lawyer - Bankruptcy and Divorce Obligations

Miami bankruptcy lawyer Jordan E. Bublick has over 25 years of experience in filing chapter 13 and chapter 7 bankruptcy cases. He has filed over 8,000 cases. Office: 1221 Brickell Ave., 9th Fl., Miami, Florida Tel.: (305) 891-4055 www.bublicklaw.com

Divorce Obligations and Chapter 7 and Chapter 13 Bankruptcy

Many issues are presented with respect to the treatment of divorce obligations in chapter 7 and chapter 13 bankruptcy.  Certain changes were made to the bankruptcy code in 2005 by the
Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) with regard to issues related to the dischargeability of marital debt and support obligations, as well as to the effect of the automatic stay on collection and enforcement proceedings out of divorce and family law litigation.

Domestic Support Obligations

Under section 104(14A) of the bankruptcy code, a domestic support obligation ("DSO") is defined as any debt that accrues before, on, or after the bankruptcy filing, including interest on the debt, that is

A. owed to or recoverable by a spouse, former spouse, or child of the debtor or such child's parent legal guardian or responsible relative or a governmental unit
B. that is in the "nature of alimony, maintenance, or support" of such spouse, former spouse or child of the debtor or the child's parent
C. established  by a separation agreement, divorce decree or property settlement agreement

Under case law, the labels put on obligations in the state court are not binding and the determination of whether debts are in the nature of alimony, maintenance or support" is a determination made under federal bankruptcy law.  The 11th Circuit Court of Appeals has held that a debt is in the nature of support or alimony if at the time of its creation, the parties intended the obligation to function as support or alimony. Cummings v. Cummings, 244 F. 3d 1263, 1265 (11th Cir. 2001).  This is a case-specific factual determination based on an examination of all relevant facts and circumstances.  The court examines the underlying purpose of the obligation to determine the function which the parties intended the award to serve.

Chapter 7 Bankruptcy

Under chapter 7 bankruptcy, a debtor receives a discharge of all his debt with certain exceptions. In Chapter 7 bankruptcy, all marital and domestic relations obligations are not dischargeable, regardless of whether they are in the nature of support, property divisions or “hold harmless” agreements, provided they were incurred by the debtor in the course of a matrimonial proceeding or a divorce action which resulted in a separation agreement, divorce decree, court order or administrative determination.

Property divisions are excepted from discharge in chapter 7. A debtor’s obligation to pay marital debts directly to a third party ("hold harmless" obligation) such as to pay the mortgage on a former marital residence and to hold the former spouse harmless on this debt is also deemed to be non-dischargeable if the obligation has the effect of providing support to the former spouse. Furthermore the following expenses are usually deemed to be in the "nature" of support and therefore not dischargeable:

• educational expenses of a minor child
• medical insurance coverage for a minor child
• life insurance, with the minor children as beneficiaries

Attorney’s fees owed by debtor to his own lawyer are generally dischargeable in bankruptcy, but as a general rule, attorney’s fees owed by debtor to a former spouse’s attorney are not dischargeable, if the underlying legal proceeding resulted in the entry of an order or judgment directing payment of maintenance or spousal support to the former spouse.

The division of a debtor’s pension benefits during the divorce action is usually accomplished by entering a Qualified Domestic Relations Order (“QDRO”). Since division of a pension is considered to be a transfer by debtor of a present interest in his pension, and as such, it is not a debt that can be discharged in bankruptcy.

Chapter 13 Bankruptcy

The rules under chapter 13 are partly different from those under chapter 7.

Under chapter 13 bankruptcy (like chapter 7 bankruptcy) domestic support obligations are not dischargeable and are usually paid in full over the term of the chapter 13 plan.   Arrearages in support obligations may usually be paid over the term of the chapter 13 plan.

In contrast to chapter 7, in chapter 13 obligations to a former spouse that is not a domestic support obligation incurred by the debtor in the course of a divorce or separation or in connection with a separation agreement, divorce decree or other order of a court" are dischargeable. created by a separation agreement or judgment of divorce are dischargeable. 

In order for a chapter 13 plan to be approved by the bankruptcy court the plan must

• pay in full to the former spouse all domestic support obligations owed by debtor at the time of the bankruptcy filing
• be current on all domestic support obligations incurred after the bankruptcy filing.

A chapter 13 case is subject to dismissal if the debtor fails to pay any post-petition domestic support obligations and a chapter 13 discharge will not be entered by the bankruptcy court unless the debtor certifies that all domestic support obligations have been paid and that the debtor is current on these  obligations.

Automatic Stay

The automatic stay created by a bankruptcy filing bars the commencement or continuation of most legal proceedings, but it has no effect on a proceeding to establish paternity; to establish or modify a child support order, determine child custody or visitation issues, or dissolve a marriage, except to the extent that such proceeding may seek to determine a division of marital property in which the bankruptcy estate also has an interest. In those situations, the divorce can be granted without first obtaining relief from the automatic stay, but the marital property cannot be divided without obtaining relief from the automatic stay.Jordan E. Bublick is a Miami Personal Bankruptcy Lawyer with over 25 years of experience in filing chapter 13 and chapter 7 bankruptcies. Miami Personal Bankruptcy Lawyer Jordan E. Bublick has filed over 8,000 chapter 13 and chapter 7 cases.